================================================================================
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------

                                   FORM 10-KSB
(MARK ONE)
[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE ACT OF
     1934

     For the Fiscal Year Ended December 31, 2005

                                       OR

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
     OF 1934

     For the transition period __________ to __________

                           Commission File No. 0-50322
                                               -------

                          COMMUNITY FIRST BANCORP, INC.
                          -----------------------------
                 (Name of Small Business Issuer in Its Charter)

               MARYLAND                                            36-4526348
-------------------------------                              -------------------
(State or Other Jurisdiction of                                (I.R.S. Employee
Incorporation or Organization                                Identification No.)


2420 NORTH MAIN STREET, MADISONVILLE, KENTUCKY                    42431
----------------------------------------------                 ----------
(Address of Principal Executive Offices)                       (Zip Code)

                    Issuer's Telephone Number (270) 326-3500
                                              --------------

       Securities Registered Under Section 12(b) of the Exchange Act: NONE

         Securities Registered Under Section 12(g) of the Exchange Act:
                          COMMON STOCK, $.01 PAR VALUE
                          ----------------------------
                                (Title of class)

     Check  whether  the issuer is not  required  to file  reports  pursuant  to
Section 13 or 15(d) of the Exchange Act.[ ]

     Check  whether  the issuer:  (l) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing  requirements for the past 90 days. YES [ X ] NO
[ ]

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  S-B  contained  in  this  form,  and no  disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

     Indicate  by check mark  whether  the  registrant  is a shell  company  (as
defined in Rule 12b-2 of the Exchange Act). YES [ ] NO [X]

     State issuer's revenues for its most recent fiscal year: $3.9 million

     The aggregate market value of the voting and non-voting  common equity held
by non-affiliates  of the registrant was approximately  $1.7 million as of March
30, 2006 based on the last sale ($6.90 per share)  reported on the OTC  Bulletin
Board  as of that  date.  Solely  for  purposes  of this  calculation,  the term
"affiliate" refers to all directors and executive officers of the registrant and
all stockholders  beneficially  owning more than 10% of the registrant's  common
stock.

     As of March 30, 2006,  there were issued and outstanding  277,725 shares of
the registrant's common stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

1.   Portions of the Registrant's definitive Proxy Statement for the 2006 Annual
     Meeting of Stockholders. (Part III)

     Transitional Small Business Disclosure Format (Check One): YES [ ] NO [ X ]

================================================================================

<PAGE>
                                     PART I

FORWARD LOOKING STATEMENTS

     When used in this discussion and elsewhere in this Annual Report, the words
or phrases  "will  likely  result,"  "are  expected  to," "will  continue,"  "is
anticipated,"   "estimate,"  "project,"  "intend"  or  similar  expressions  are
intended  to  identify  "forward-looking  statements"  within the meaning of the
Private  Securities  Litigation Reform Act of 1995. The Company cautions readers
not to place undue reliance on any such forward-looking statements,  which speak
only as of the date made, and to advise readers that various factors,  including
regional and  national  economic  conditions,  unfavorable  judicial  decisions,
substantial  changes in levels of market interest rates,  credit and other risks
of lending and investment  activities  and  competitive  and regulatory  factors
could affect the Bank's financial  performance and could cause the Bank's actual
results  for future  periods to differ  materially  from  those  anticipated  or
projected.

     The Company does not undertake and  specifically  disclaims any obligations
to update any forward-looking statements to reflect occurrence of anticipated or
unanticipated events or circumstances after the date of such statements.

ITEM 1.  DESCRIPTION OF BUSINESS
--------------------------------

     THE COMPANY.  Community  First  Bancorp,  Inc. (the  "Company")  became the
holding  company  for  Community  First  Bank  (the  "Bank")  in June  2003 upon
completion of the Bank's  conversion to stock form.  The Company does not engage
in any  activities  other than  holding the stock of the Bank.  At December  31,
2005, the Company had total assets of $71.7 million,  loans  receivable of $64.6
million, total deposits of $54.5 million and total equity of $2.7 million.

     The  Company's  executive  offices are  located at 2420 North Main  Street,
Madisonville,  Kentucky and its main  telephone  number is (270)  326-3500.  The
Company also maintains a website at

     THE BANK.  The Bank is a federal stock savings bank  operating  through two
offices in Madisonville,  Kentucky. Founded in 1923 as the Madisonville Building
and Loan  Association,  the Bank  converted  to a federal  mutual  savings  bank
charter and adopted its current name in 2002. In June 2003,  the Bank  converted
to stock form and became a subsidiary  of the  Company.  The Bank is a member of
the Federal  Home Loan Bank  ("FHLB")  System.  Its  deposits  are insured up to
applicable  limits by the Savings  Association  Insurance  Fund  ("SAIF") of the
Federal Deposit Insurance Corporation ("FDIC").

     The Bank's  principal  business  consists of  attracting  deposits from the
general public and originating  residential mortgage loans. The Bank also offers
commercial and multi-family  real estate loans,  various types of consumer loans
and a limited number of commercial business loans.

MARKET AREA

     We consider  our primary  market  area to be the City of  Madisonville  and
surrounding Hopkins County, Kentucky. Located in the Western Coalfield Region of
Kentucky,  Hopkins  County had a  population  of  approximately  46,600 in 2002.
Madisonville  is the county seat and largest city in Hopkins  County and is home
to one of the major healthcare facilities in the Commonwealth of Kentucky.

     The largest  employers  in  Madisonville  and the  surrounding  communities
include the Trover Regional Medical Center,  General  Electric  Aircraft Engine,
Carhartt,  Inc. and Lear  Corporation.  By industry,  the largest sectors of the
Madisonville  economy are healthcare and  manufacturing.  The 2004  unemployment
rate for  Hopkins  County  was 5.3%,  compared  to 5.5%  nationally.  The median
household  income of $33,233 in 2003 for Hopkins County was below the median for
Kentucky as a whole of $36,663 and for the United  States of $43,318.  While the
population of Madisonville grew by approximately 19% from 1990 to 2000,  Hopkins
County as a whole grew less than 1.0%. By comparison, the population of Kentucky
grew by 9.6%. The population of Hopkins County is projected to decline  slightly
during the next decade  according to projections by the Kentucky  Department for
Economic Development.
                                       2
<PAGE>

LENDING ACTIVITIES

     Our loan  portfolio  consists  primarily of mortgage loans secured by first
liens on one- to  four-family  residences.  We also make  consumer,  residential
construction and commercial real estate and commercial  business loans. While we
have  continued our historic  emphasis on one- to four-family  lending,  we have
also sought to grow our portfolio of commercial mortgages.

     At December 31, 2005, our gross loans totaled $65.0 million, of which $47.7
million were first mortgage loans secured by one- to four-family residences.  We
originate adjustable-rate mortgage ("ARM") loans with rates that adjust annually
after an initial  period of one,  three,  five or seven years  during  which the
interest  rate  is  fixed.   We  offer  similar  terms  on  our  commercial  and
multi-family  mortgages.  Our  consumer  loans may have either fixed or variable
rates.

     Substantially  all of the Bank's  borrowers are located in Hopkins  County,
Kentucky  and would be expected to be  similarly  affected by economic and other
conditions  in this area.  The Company does not believe that there are any other
concentrations of loans or borrowers exceeding 10% of total loans.

     The following  table sets forth  information  concerning the types of loans
held by the Company at the dates indicated.
<TABLE>
<CAPTION>
                                                                        AT DECEMBER 31,
                                                         -------------------------------------------------
                                                                 2005                        2004
                                                         ---------------------      ----------------------
                                                         AMOUNT           %          AMOUNT            %
                                                         ------        ------        ------         ------
<S>                                                      <C>            <C>           <C>           <C>
     Real estate mortgage loans:
       One- to four-family residential first...          $47,739        73.49%        $39,758       76.09%
       One- to four-family residential second..            1,755         2.70           1,208        2.31
       Multi-family............................              791         1.22           1,075        2.06
       Commercial..............................            7,356        11.32           2,953        5.65
       Construction............................            2,305         3.55           1,900        3.64
     Other loans:
       Consumer installment....................              194         0.30             252        0.48
       Commercial..............................              820         1.26           2,370        4.54
       Automobile..............................            2,898         4.46           1,905        3.64
       Passbook................................              398         0.61             330        0.63
       Other...................................              710         1.09             501        0.96
                                                         -------       ------         -------      ------
                                                          64,966       100.00%         52,252      100.00%
                                                                       ======                      ======
     Less:
       Unearned interest.......................               --                           --
       Allowance for loan losses...............              388                          320
       Loans in process........................               --                           --
                                                         -------                      -------
          Total................................          $64,578                      $51,932
                                                         =======                      =======
</TABLE>

                                       3
<PAGE>
     The following table sets forth the estimated maturity of the Company's loan
portfolio  at  December  31,  2005.  The table does not  include  the effects of
possible  prepayments or scheduled  repayments.  All mortgage loans are shown as
maturing based on the date of the last payment required by the loan agreement.
<TABLE>
<CAPTION>
                                               DUE WITHIN            DUE AFTER             DUE OVER 5
                                             ONE YEAR AFTER      1 THROUGH 5 YEARS        YEARS AFTER
                                           DECEMBER 31, 2005     DECEMBER 31, 2005     DECEMBER 31, 2005         TOTAL
                                           -----------------     -----------------     -----------------         -----
                                                                           (IN THOUSANDS)
<S>                                             <C>                    <C>                  <C>                 <C>
Real estate mortgage loans:
  One- to four-family residential first         $1,270                 $1,202               $45,267             $47,739
  One- to four-family residential second             3                  1,583                   169               1,755
  Multi-family......................                --                     --                   791                 791
  Commercial........................               329                  1,322                 5,705               7,356
  Construction......................             2,077                     --                   228               2,305
Other loans:
  Consumer installment..............                38                    100                    56                 194
  Commercial........................               311                    263                   246                 820
  Automobile........................               117                  2,702                    79               2,898
  Passbook..........................               168                    121                   109                 398
  Other.............................               121                    177                   412                 710
                                               -------                -------             ---------           ---------
      Total.........................            $4,434                 $7,470               $53,062             $64,966
                                                ======                 ======               =======             =======
</TABLE>

     The next table sets forth at December  31, 2005,  the dollar  amount of all
loans due one year or more after  December  31,  2005  which have  predetermined
interest rates and have floating or adjustable  interest rates.  The majority of
our floating or adjustable  rate loans are  mortgages  whose rates do not adjust
until after an initial period of one, three, five or seven years.
<TABLE>
<CAPTION>
                                                                    PREDETERMINED         FLOATING OR
                                                                        RATE           ADJUSTABLE RATES
                                                                    -------------      ----------------
                                                                             (IN THOUSANDS)
<S>                                                                 <C>                   <C>
     Real estate mortgage loans:
         One- to four-family residential first...........           $  7,919              $ 38,596
         One- to four-family residential second..........                416                 1,335
         Multi-family....................................                375                   416
         Commercial......................................              6,081                   947
         Construction....................................                185                    43
     Other loans:
         Consumer installment............................                155                    --
         Commercial......................................                511                    --
         Automobile......................................              2,781                    --
         Passbook........................................                230                    --
         Other...........................................                542                    --
                                                                    --------              --------
              Total......................................           $ 19,195              $ 41,337
                                                                    ========              ========
</TABLE>

     ONE-  TO  FOUR-FAMILY  RESIDENTIAL  LOANS.  Our  primary  lending  activity
consists of the  origination of one- to four-family  residential  first mortgage
loans  secured by property  located in our primary  market  area.  We  generally
originate one- to four-family residential mortgage loans in amounts up to 80% of
the lesser of the  appraised  value or the  purchase  price with a maximum  loan
amount of  $642,000  and a maximum  term of 30 years.  We will make  residential
mortgage loans with loan-to-value ratios greater than 80% as long as they comply
with  secondary  market  standards.  Currently  we do not sell our  loans in the
secondary  market,  but  instead  act  as  an  originator  by  taking  the  loan
application  and then  forwarding it to a secondary  market lender.  Although we
make  loans  on one- to  four-family  rental  properties,  the  majority  of our
residential first mortgages are on owner-occupied properties.

                                       4
<PAGE>

     The first mortgage loans that we originate for our portfolio generally have
rates that adjust annually after an initial period of one, three,  five or seven
years during which the rate is fixed.  We do not  originate  30-year  fixed rate
loans for our portfolio.

     The interest  rate on ARM loans is based on an index plus a stated  margin.
ARM loans provide for periodic  interest rate adjustments  upward or downward of
up to two percentage  points per year with a limit of six percentage points over
the life of the loan.  Borrowers on ARM loans must qualify at the fully adjusted
rate. The rates on our ARM loans are generally  indexed to the rates on one-year
U.S.  Treasury  bills  adjusted  to a  constant  maturity.  We also  have in our
portfolio  ARM loans which are indexed to the average  cost of funds for savings
associations in the 11th Federal Home Loan Bank District.  We discontinued using
this index in 1996  because it tended to lag the market and such loans were less
than 0.95% of the portfolio at December 31, 2005.

     In addition to one- to four-family  first mortgage  loans,  we offer second
mortgage loans. We offer second mortgages to customers on whose property we hold
the first  mortgage and to other  customers as well.  Our second  mortgage loans
have fixed  terms of up to 10 years and have fixed  rates of  interest.  We only
originate  a  second  mortgage  if the  aggregate  indebtedness  secured  by the
property will not exceed 80% of its appraised  value.  We also offer home equity
lines of credit,  which are similar to our second mortgages,  but on a revolving
term.

     ARM loans  decrease the risk  associated  with changes in interest rates by
periodically  repricing,  but  involve  other risks  because as  interest  rates
increase, the underlying payments by the borrower increase,  thus increasing the
potential for default by the borrower.  At the same time, the  marketability  of
the underlying  collateral may be adversely  affected by higher  interest rates.
Upward  adjustment  of the  contractual  interest  rate is also  limited  by the
maximum  periodic and lifetime  interest rate  adjustment  permitted by the loan
documents, and, therefore is potentially limited in effectiveness during periods
of rapidly rising interest rates. At December 31, 2005, approximately 80% of the
one- to four-family  residential loans we held had adjustable rates of interest.
The Bank's  adjustable-rate loans consist primarily of one, three, five or seven
year ARMs whose rates may not be currently adjusting.

     The mortgage  loans we originate  and hold  generally  include  due-on-sale
clauses.  These clauses give us the right to deem the loan  immediately  due and
payable in the event the borrower  transfers  ownership of the property securing
the mortgage loan without our consent.

     RESIDENTIAL  CONSTRUCTION  LOANS.  We make a limited  number of residential
construction  loans  on  one-  to  four-family  residential  properties  to  the
individuals   who  will  be  the  owners  and  occupants   upon   completion  of
construction.  Borrowers are required to pay interest on disbursed  funds during
the construction  period,  which may not last beyond 12 months. The borrower may
pay off the loan with a permanent  loan from us at completion  of  construction.
Loan proceeds are disbursed  according to a draw schedule and the appraiser must
inspect the progress of the construction  before additional funds are disbursed.
Construction loans are offered on either a fixed or adjustable basis.

     Construction  lending is generally considered to involve a higher degree of
credit risk than long-term financing of residential properties. Our risk of loss
on a  construction  loan is  dependent  largely upon the accuracy of the initial
estimate of the property's value at completion of construction and the estimated
cost of construction. If the estimate of construction cost and the marketability
of the property upon completion of the project prove to be inaccurate, we may be
compelled to advance additional funds to complete the construction. Furthermore,
if the final value of the completed  property is less than the estimated amount,
the value of the property might not be sufficient to assure the repayment of the
loan.

     COMMERCIAL  AND  MULTI-FAMILY  REAL ESTATE LOANS.  We offer  commercial and
multi-family real estate loans secured by apartment buildings,  churches, office
buildings,  and other commercial  properties.  Commercial and multi-family  real
estate  loans are made for terms of up to 20 years  and have  rates of  interest
that  are  fixed  for a  period  of one  to  seven  years  and  adjust  annually
thereafter.  The interest rates on commercial and multi-family loans are indexed
to the prime rate. Loan amounts may not exceed 70% of the appraised value of the
property.  Over the past  several  years,  the Bank has sought to  increase  its
originations  of  commercial  and  multi-family  real  estate  loans in order to
diversify the portfolio and serve the needs of the market.

                                       5
<PAGE>

     At December 31, 2005, the Bank's largest  commercial real estate loan was a
$481,900 loan secured by a 404-acre farm in Morganfield,  Kentucky originated in
October 2005. The 10-year fully  amortizing  loan bears a fixed rate of interest
for the life of the loan. The loan-to-value ratio at origination was 43% and the
loan is personally  guaranteed by the principal of the corporate  borrower.  The
Bank's second  largest loan was a $421,300  loan secured by a 28-unit  apartment
complex  in  Madisonville   originated  in  December  2003.  The  20-year  fully
amortizing  loan bears a fixed rate of  interest for seven years and floats with
the prime rate thereafter.  The  loan-to-value  ratio at origination was 64% and
the loan is personally guaranteed by the principals of the corporate borrower.

     Commercial  and  multi-family  real  estate  lending  entails   significant
additional risks compared to residential property lending. These loans typically
involve large loan balances to single borrowers or groups of related  borrowers.
The repayment of these loans typically is dependent on the successful  operation
of the real estate project  securing the loan.  These risks can be significantly
affected  by supply  and demand  conditions  in the market for office and retail
space and may also be subject to adverse conditions in the economy.  To minimize
these risks,  we generally  limit this type of lending to our market area and to
borrowers who are otherwise well known to us.

     COMMERCIAL  BUSINESS  LOANS.  We engage in a limited  amount of  commercial
business  lending  primarily for the  accommodation of existing  customers.  Our
commercial  business loans  generally are secured by equipment or other tangible
assets. Our largest commercial  business loan at December 31, 2005 had a balance
of approximately $85,200 and was made to a local hydraulic hose and pipe-fitting
company and is secured by equipment, inventory and accounts receivable.

     Unlike residential mortgage loans, which generally are made on the basis of
the  borrower's  ability to make  repayment from his or her employment and other
income  and which are  secured by real  property  whose  value  tends to be more
easily ascertainable,  commercial business loans typically are made on the basis
of the borrower's ability to make repayment from the cash flow of the borrower's
business. As a result, the availability of funds for the repayment of commercial
business  loans may be  substantially  dependent  on the success of the business
itself and the general economic environment.

     CONSUMER  LOANS.  We  offer  various  types of  consumer  loans in order to
provide a wider range of financial  services to our  customers.  Consumer  loans
totaled $4.2  million,  or 6.5%,  of our total loans at December  31, 2005.  Our
consumer loans consist of automobile,  personal unsecured loans, passbook,  home
improvement  loans and  equipment  loans.  Passbook and  certificate  of deposit
secured  loans are offered up to the maximum of the deposit  balance and are due
on demand.

     We offer loans for both new and used  automobiles with maximum terms of SIX
years and maximum loan amounts up to 90% of the manufacturer's  suggested retail
price on new cars or fair market value of the automobile on used cars.  Personal
unsecured  loans generally are made for amounts of $2,000 or less and terms of 6
months and may have fixed or variable interest rates.

     Consumer loans may entail  greater risk than  residential  mortgage  loans,
particularly  in the case of  consumer  loans that are  unsecured  or secured by
assets that depreciate rapidly.  Repossessed collateral for a defaulted consumer
loan may not be  sufficient  for  repayment  of the  outstanding  loan,  and the
remaining deficiency may not be collectible.

     LOAN  SOLICITATION,  APPROVAL  AND  UNDERWRITING.  The  Bank  obtains  loan
customers   from  a  variety  of  sources,   including   advertising,   personal
solicitation,  repeat customers and referrals from existing customers, realtors,
builders  and  others.  The Bank  also  solicits  applications  for  residential
mortgages  through its website.  Although the President and Vice Presidents have
authority to originate loans up to the loans-to-one borrower limits, loans other
than single-family  owner-occupied  mortgages and residential  mortgage loans in
excess  of  $250,000  are  generally  submitted  to the Board of  Directors  for
approval.

     Upon receipt of a completed loan application from a prospective borrower, a
credit report is ordered.  Income and certain other information is verified.  If
necessary,  additional financial  information may be requested.  An appraisal or
other  estimate of value of the real estate  intended to be used as security for
the proposed loan is obtained. Appraisals are prepared by outside fee appraisers
who are approved by the Board of Directors.

                                       6
<PAGE>

     A title opinion or title insurance is generally required on all real estate
loans.  Borrowers also must obtain fire and casualty insurance.  Flood insurance
is also required on loans secured by property which is located in a flood zone.

     LOAN ORIGINATIONS.  The following table sets forth certain information with
respect  to our  loan  originations  for the  periods  indicated.  We  have  not
purchased or sold any loans in the secondary market in recent years.
<TABLE>
<CAPTION>
                                                           YEAR ENDED DECEMBER 31,
                                                           -----------------------
                                                             2005            2004
                                                           -------         -------
                                                               (IN THOUSANDS)
<S>                                                          <C>           <C>
Loans originated:
  Real estate mortgage loans:
     One- to four-family residential first ...........       $17,539       $16,696
     One- to four-family residential second ..........           991           231
     Multi-family ....................................            --           269
     Commercial ......................................         2,903         4,208
     Construction ....................................         2,201         3,043
 Other loans:
     Consumer installment ............................            72           419
     Commercial ......................................           680         1,167
     Automobile ......................................         2,054         1,810
     Passbook ........................................           265           353
     Other ...........................................           291           109
                                                             -------       -------
        Total loans originated .......................       $26,996       $28,305
                                                             =======       =======
</TABLE>

     LOANS TO ONE BORROWER. The maximum amount of loans which we may make to any
one  borrower  may not exceed the greater of  $500,000 or 15% of our  unimpaired
capital and unimpaired  surplus. We may lend an additional 10% of our unimpaired
capital  and  unimpaired  surplus  if the  loan  is  fully  secured  by  readily
marketable collateral. Our maximum  loans-to-one-borrower  limit was $642,000 at
December  31,  2005.  At  December  31,  2005,  our largest  loan  concentration
outstanding  had a balance of $955,600  and  consisted  of two loans  secured by
non-residential  commercial  properties  and two loans  secured by  multi-family
apartment complexes.

NONPERFORMING AND PROBLEM ASSETS

     LOAN  DELINQUENCIES.  Generally  when a mortgage  loan becomes 15 days past
due,  a notice  of  nonpayment  is sent to the  borrower.  If  payment  is still
delinquent after 30 days, the borrower will receive a formal delinquency notice.
The borrower  will be contacted by telephone or visited  personally  if the loan
remains  delinquent after 45 days. If the loan continues in a delinquent  status
for 120 days  past due and no  repayment  plan is in  effect,  the loan  will be
referred to an attorney for collection, with foreclosure commenced no later than
180 days.  The customer  will be notified  when  foreclosure  is  commenced.  At
December 31, 2005, our loans past due between 30 and 89 days totaled $251,000.

     Loans  are  reviewed  on a  monthly  basis  and are  generally  placed on a
non-accrual  status when the loan becomes more than 90 days  delinquent or when,
in our opinion,  the  collection  of additional  interest is doubtful.  Interest
accrued and unpaid at the time a loan is placed on nonaccrual  status is charged
against  interest  income.  Subsequent  interest  payments,  if any,  are either
applied to the  outstanding  principal  balance or recorded as interest  income,
depending on the assessment of the ultimate collectibility of the loan.

                                       7
<PAGE>

     NONPERFORMING  ASSETS. The following table sets forth information regarding
non-accrual  loans,  accruing  loans  past due 90 days or more  and real  estate
owned. The Bank did not have any troubled debt restructurings within the meaning
of Statement of Financial  Accounting  Standards  No. 15 at the dates  indicated
below.
<TABLE>
<CAPTION>
                                                                AT DECEMBER 31,
                                                           ------------------------
                                                            2005              2004
                                                           ------            ------
                                                           (DOLLARS IN THOUSANDS)
<S>                                                        <C>               <C>
Loans accounted for on a non-accrual basis:(1)
  Real estate:
    One- to four-family residential first..........        $  259            $  119
    One- to four-family residential second.........             3                 3
    Multi-family...................................            --                --
    Commercial.....................................            --                --
    Construction...................................            --                --
  Other loans:
     Consumer installment..........................            --                --
     Commercial....................................            --                --
     Automobile....................................            1                  9
     Passbook......................................            --                --
     Other.........................................            --                --
                                                           ------            ------
     Total.........................................        $  263            $  131
                                                           ======            ======

Accruing loans which are contractually
  past due 90 days or more:
  Real estate:
    One- to four-family residential first..........        $   44            $  158
    One- to four-family residential second.........            --                --
    Multi-family...................................            --                --
    Commercial.....................................            --                --
    Construction...................................            --                --
  Other loans:
     Consumer installment..........................            --                --
     Commercial....................................            --                --
     Automobile....................................            --                 6
     Passbook......................................            --                --
     Other.........................................            --                 1
                                                           ------            ------
     Total.........................................        $   44            $  165
                                                           ======            ======
     Total nonperforming loans.....................        $  307            $  296
                                                           ======            ======
  Percentage of total loans........................          0.47%             0.57%
                                                           ======            ======

  Other non-performing assets(2)...................        $   --            $   --
                                                           ======            ======
<FN>
---------------
(1)      Non-accrual   status  denotes  loans  on  which,   in  the  opinion  of
         management, the collection of additional interest is unlikely. Payments
         received on a  nonaccrual  loan are either  applied to the  outstanding
         principal  balance  or  recorded  as  interest  income,   depending  on
         management's assessment of the collectibility of the loan.
(2)      Other  nonperforming  assets  represents  property acquired by the Bank
         through  foreclosure or  repossession.  This property is carried at the
         lower of its fair market value or the principal  balance of the related
         loan, whichever is lower.
</FN>
</TABLE>

     During  the  year  ended  December  31,  2005,  gross  interest  income  of
approximately  $6,400  would  have been  recorded  on loans  accounted  for on a
nonaccrual  basis if the  loans  had been  current  throughout  the  period.  No
interest on such loans was included in income during 2005.

                                       8
<PAGE>

     Loans which are not currently  classified as non-accrual,  90 days past due
or restructured  but where known  information  about possible credit problems of
borrowers  causes  management to have serious  concerns as to the ability of the
borrowers  to  comply  with  present  loan  repayment  terms  and may  result in
disclosure as non-accrual,  90 days past due or restructured  amounted to $7,000
at December 31, 2005.

     CLASSIFIED ASSETS. OTS regulations provide for a classification  system for
problem assets of savings  institutions  which covers all problem assets.  Under
this classification  system, problem assets of savings institutions such as ours
are classified as  "substandard,"  "doubtful," or "loss." An asset is considered
substandard if it is inadequately  protected by the current net worth and paying
capacity  of the  borrower or of the  collateral  pledged,  if any.  Substandard
assets  include  those  characterized  by the  "distinct  possibility"  that the
savings  institution  will  sustain  "some  loss"  if the  deficiencies  are not
corrected.  Assets classified as doubtful have all of the weaknesses inherent in
those classified substandard,  with the added characteristic that the weaknesses
present  make  "collection  or  liquidation  in full,  on the basis of currently
existing facts,  conditions,  and, values, "highly questionable and improbable."
Assets  classified  as loss are  those  considered  "uncollectible"  and of such
little value that their  continuance  as assets without the  establishment  of a
specific  loss  reserve  is not  warranted.  Assets may be  designated  "special
mention"   because  of  potential   weakness  that  do  not  currently   warrant
classification in one of the aforementioned categories.

     When a savings institution  classifies problem assets as either substandard
or doubtful,  it may establish  general  allowances for loan losses in an amount
deemed prudent by management. General allowances represent loss allowances which
have been  established  to recognize the inherent risk  associated  with lending
activities,  but which, unlike specific  allowances,  have not been allocated to
particular problem assets. When a savings institution  classifies problem assets
as loss,  it is required  either to  establish a specific  allowance  for losses
equal to 100% of that portion of the asset so  classified  or to charge off such
amount. A savings  institution's  determination as to the  classification of its
assets and the amount of its  valuation  allowances  is subject to review by the
OTS, which may order the  establishment  of additional  general or specific loss
allowances.  A portion of general loss allowances  established to cover possible
losses  related to assets  classified as substandard or doubtful may be included
in determining a savings  institution's  regulatory capital.  Specific valuation
allowances for loan losses generally do not qualify as regulatory capital.

     At December 31, 2005, we had $436,000 in loans  classified  as  substandard
and no loans  classified as doubtful or loss. The Bank's  substandard  assets at
December  31, 2005  consisted of 14  residential  first  mortgages.  Reserves of
$65,000 have been allocated to the substandard assets.

     FORECLOSED  REAL ESTATE.  Real estate  acquired in  settlement  of loans is
carried at the lower of the  unpaid  loan  balance or fair value less  estimated
costs to sell.  Write-downs  from the unpaid  loan  balance to fair value at the
time of  foreclosure  are charged to the allowance  for loan losses.  Subsequent
write-downs to fair value, net of disposal costs, are charged to other expenses.
At  December  31,  2005,  we had no  properties  which  we  received  in lieu of
foreclosure.

     ALLOWANCE FOR LOAN LOSSES.  The  allowance for loan losses is  management's
estimate of probable inherent credit losses in the loan portfolio at the balance
sheet date. The Bank determines the allowance based on ongoing evaluations. This
evaluation  is inherently  subjective  because it requires  material  estimates,
including  the  amounts  and timing of cash flows  expected  to be  received  on
impaired  loans.  Those  estimates may be  susceptible  to  significant  change.
Increases to the allowance are made by charges to the provision for loan losses,
which  is  reflected  in  the  statements  of  operations.  Loans  deemed  to be
uncollectible are charged against the allowance.  Recoveries of loans previously
charged off are credited to the  allowance.  See  "Management's  Discussion  and
Analysis of Financial Condition and Results of Operations -- Critical Accounting
Policies" for further  discussion of the Bank's  methodology for determining the
allowance.

     We  monitor  our  allowance  for  loan  losses  and make  additions  to the
allowance as economic  and other  conditions  dictate.  Although we maintain our
allowance for loan losses at a level that we consider  adequate for the inherent
risk of loss in our loan  portfolio,  actual  losses could exceed the balance of
the allowance for loan losses and additional provisions for loan losses could be
required.  In addition,  our determination as to the amount of its allowance for
loan losses is subject to review by the OTS, as part of its examination process.
After  a  review  of the  information  available,  the  OTS  might  require  the
establishment of an additional allowance.

                                       9
<PAGE>

     The following table sets forth an analysis of our allowance for loan losses
for the periods indicated.
<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31,
                                                              --------------------------
                                                                2005              2004
                                                              --------          --------
                                                               (DOLLARS IN THOUSANDS)
<S>                                                           <C>               <C>
Balance at beginning of period.....................           $   320           $   181
                                                              -------           -------

Loans charged-off:
  Real estate mortgage loans:
    One- to four-family residential first..........                (5)               (9)
    One- to four-family residential second.........                --                --
    Multi-family...................................                --                --
    Commercial.....................................                --                --
    Construction...................................                --                --
  Other loans:
    Consumer installment...........................                --                --
    Commercial.....................................                --                --
    Automobile.....................................                (6)              (12)
    Passbook.......................................                --                --
    Other..........................................                (5)               (4)
                                                              -------           -------
Total charge-offs..................................               (16)              (25)
                                                              -------           -------

Recoveries:
  Real estate mortgage loans:
    One- to four-family residential first..........                --                --
    One- to four-family residential second.........                --                --
    Multi-family...................................                --                --
    Commercial.....................................                --                --
    Construction...................................                --                --
  Other loans:
    Consumer installment...........................                --                 1
    Commercial.....................................                --                --
    Automobile.....................................                --                --
    Passbook.......................................                --                --
    Other..........................................                 6                --
                                                              -------           -------
Total recoveries...................................                 6                 1
                                                              -------           -------

Net loans charged-off..............................               (10)              (24)
                                                              -------           -------
Provision for loan losses..........................                78               163
                                                              -------           -------

Balance at end of period...........................           $   388           $   320
                                                              =======           =======

Ratio of net charge-offs to average
   loans outstanding during the period.............              0.02%             0.05%
                                                              =======           =======
</TABLE>

                                       10
<PAGE>

     The following  table  illustrates  the allocation of the allowance for loan
losses for each  category  of loan.  The  allocation  of the  allowance  to each
category is not necessarily indicative of future loss in any particular category
and does not  restrict our use of the  allowance to absorb  losses in other loan
categories.
<TABLE>
<CAPTION>
                                                                   AT DECEMBER 31,
                                               ----------------------------------------------------------
                                                        2005                           2004
                                               ---------------------------    ---------------------------
                                                             PERCENT OF                     PERCENT OF
                                                             LOANS IN EACH                  LOANS IN EACH
                                                             CATEGORY TO                    CATEGORY TO
                                               AMOUNT        TOTAL LOANS      AMOUNT        TOTAL LOANS
                                               ------        -----------      ------        -----------
                                                                  (DOLLARS IN THOUSANDS)
<S>                                               <C>            <C>             <C>             <C>
Real estate mortgage loans:
    One- to four-family residential first         $ 285          73.49%          $ 257           76.09%
    One- to four-family residential second           11           2.70               3            2.31
    Multi-family.........................             5           1.22               2            2.06
    Commercial...........................            44          11.32              22            5.65
    Construction.........................            14           3.55               8            3.64
Other loans:
    Consumer installment.................             1           0.30               6            0.48
    Commercial...........................             5           1.26               8            4.54
    Automobile...........................            17           4.46              14            3.64
    Passbook.............................             2           0.61              --            0.63
    Other................................             4           1.09              --            0.96
                                                  -----         -------          -----         -------

     Total allowance for loan losses.....         $ 388         100.00%          $ 320          100.00%
                                                  =====         ======           =====          ======
</TABLE>

INVESTMENT ACTIVITIES

     INVESTMENT SECURITIES. We are required by federal regulations to maintain a
minimum  amount of liquid  assets which may be invested in specified  short-term
securities  and certain  other  investments.  The level of liquid  assets varies
depending  upon  several  factors,  including:  (i)  the  yields  on  investment
alternatives;  (ii) our  judgment  as to the  attractiveness  of the yields then
available in relation to other opportunities;  (iii) expectation of future yield
levels;  and (iv) our  projections as to the  short-term  demand for funds to be
used in loan  origination  and other  activities.  At  December  31,  2005,  our
investment  securities  portfolio  consisted  primarily of FHLB bonds of various
maturities.

     Our  securities  at December  31, 2005 did not  contain  securities  of any
issuer with an  aggregate  book value in excess of 10% of our equity,  excluding
those issued by the United States Government or its agencies.

     MORTGAGE-BACKED   SECURITIES.  We  have  invested  from  time  to  time  in
residential mortgage-backed securities.  Mortgage-backed securities can serve as
collateral for borrowings  and,  through  repayments,  as a source of liquidity.
Mortgage-backed  securities represent a participation interest in a pool of one-
to four-family or other type of mortgages.  Principal and interest  payments are
passed  from  the  mortgage  originators,   through  intermediaries   (generally
quasi-governmental agencies) that pool and repackage the participation interests
in the  form  of  securities,  to  investors  such  as us.  Our  mortgage-backed
securities  portfolio  consists  primarily  of  participations  or  pass-through
certificates  issued by the Government National Mortgage  Association  ("GNMA").
GNMA  certificates are guaranteed as to principal and interest by the full faith
and credit of the United States. Our  mortgage-backed  securities  portfolio was
classified as "held-to-maturity" at December 31, 2005.

     Expected  maturities  will  differ  from  contractual   maturities  due  to
scheduled  repayments and because borrowers may have the right to call or prepay
obligations with or without prepayment penalties.

     Mortgage-backed  securities  typically  are issued  with  stated  principal
amounts.  The  securities  are backed by pools of mortgages that have loans with
interest  rates that are  within a set range and have  varying  maturities.  The
underlying pool of mortgages can be composed of either  fixed-rate or adjustable
mortgage loans. Mortgage-backed securities are generally referred to as mortgage
participation certificates or pass-through certificates.  The interest rate risk
characteristics  of the  underlying  pool  of  mortgages  (i.e.,  fixed-rate  or
adjustable-rate)  and the  prepayment  risk,

                                       11
<PAGE>

are  passed  on  to  the  certificate  holder.  The  life  of a  mortgage-backed
pass-through security is equal to the life of the underlying mortgages.

     The  following  table  sets  forth  the  carrying  value of our  investment
securities and mortgage-backed portfolio at the dates indicated.
<TABLE>
<CAPTION>
                                                                     AT DECEMBER 31,
                                                                -------------------------
                                                                  2005             2004
                                                                --------         --------
                                                                      (IN THOUSANDS)
<S>                                                             <C>              <C>
Securities available-for-sale:
   U.S. government and agency securities..............          $  1,703         $  2,215
Securities held-to-maturity:
   Mortgage-backed securities.........................                 6               89
                                                                --------         --------
      Total investments...............................          $  1,769         $  2,304
                                                                ========         ========
</TABLE>

                                       12
<PAGE>
     The following table sets forth the scheduled  maturities,  carrying values,
market values and average  yields for our  investment  portfolio at December 31,
2005.  The  amortized  cost and fair  value of  mortgage-backed  securities  are
presented  in the  held-to-maturity  category  by  contractual  maturity  in the
following  table.  Expected  maturities  may differ from  contracted  maturities
because borrowers may have the right to call or prepay obligations  without call
or prepayment penalties.
<TABLE>
<CAPTION>

                                              ONE YEAR OR LESS          ONE TO FIVE YEARS       FIVE TO TEN YEARS
                                             -------------------     -----------------------  ----------------------
                                                         WEIGHTED                 WEIGHTED                WEIGHTED
                                             CARRYING    AVERAGE     CARRYING     AVERAGE     CARRYING    AVERAGE
                                               VALUE      YIELD        VALUE       YIELD        VALUE       YIELD
                                             ---------   -------     ---------    -------     ---------   --------
                                                                    (DOLLARS IN THOUSANDS)
<S>                                          <C>             <C>     <C>              <C>     <C>
Securities available for sale:
  U.S. government and agency securities      $  1,000        2.05%   $    752         3.13%   $     --       -- %

Securities held to maturity:
  Mortgage-backed securities...........            --          --          16         8.00          --
                                             --------                --------                 --------

     Total.............................      $  1,000                $    768                 $     --
                                             ========                ========                 ========

<CAPTION>

                                             MORE THAN TEN YEARS      TOTAL INVESTMENT SECURITIES
                                             -------------------     -------------------------------
                                                         WEIGHTED
                                             CARRYING    AVERAGE     CARRYING    MARKET      AVERAGE
                                               VALUE       YIELD       VALUE       VALUE      YIELD
                                             ---------   --------    ---------   --------    ------
                                                               (DOLLARS IN THOUSANDS)
<S>                                          <C>                     <C>         <C>          <C>
Securities available for sale:
  U.S. government and agency securities      $     --        --%     $  1,752    $  1,703     2.51%

Securities held to maturity:
  Mortgage-backed securities...........            50      8.39            66          69     8.29
                                             --------                --------    --------

     Total.............................      $     50                $  1,818     $ 1,772
                                             ========                ========     =======
</TABLE>

                                       13

<PAGE>

SOURCES OF FUNDS

     Deposits  are our major  external  source of funds  for  lending  and other
investment  purposes.  Funds are also  derived  from the  receipt of payments on
loans and  prepayment  of loans and,  to a much  lesser  extent,  maturities  of
investment securities and mortgage-backed securities, borrowings and operations.
Scheduled  loan principal  repayments  are a relatively  stable source of funds,
while  deposit  inflows and  outflows  and loan  prepayments  are  significantly
influenced by general interest rates and market conditions.

     DEPOSITS.  We attract  deposits  principally from within our primary market
area  through  the  offering  of a selection  of deposit  instruments  including
regular savings accounts,  money market accounts, and term certificate accounts.
Deposit account terms vary according to the minimum balance  required,  the time
period the funds must remain on deposit,  and the  interest  rate.  The interest
rates  we pay  on  deposits  are  set  weekly  at the  direction  of our  senior
management.  Interest rates are determined based on our liquidity  requirements,
interest  rates paid by our  competitors,  and our growth  goals and  applicable
regulatory restrictions and requirements.

     Like most savings institutions,  the Bank has historically relied primarily
on  certificates  of deposit  for  funding.  In order to attract  funds in prior
years,  the Bank had paid higher rates on certificate  accounts which caused its
cost of funds to  increase.  Recently,  the Bank has  attempted  to  reduce  its
reliance on certificate accounts by attracting more transaction  accounts,  such
as checking,  NOW and money market accounts. As higher rate certificates mature,
the Bank expects to reduce its cost of funds.

     The following table sets forth the average  balances and rates paid for the
Bank's various categories of deposits for the past two fiscal years.
<TABLE>
<CAPTION>
                                                       YEAR ENDED DECEMBER 31,
                                              -----------------------------------------
                                                      2005                2004
                                              ------------------   --------------------
                                              AVERAGE    AVERAGE   AVERAGE      AVERAGE
                                              BALANCE     RATE     BALANCE       RATE
                                              -------    -------   -------      -------
                                                      (DOLLARS IN THOUSANDS)

<S>                                          <C>                   <C>
Non-interest-bearing demand............      $  4,968      -- %    $  2,722       -- %
Interest-bearing demand................         4,726     0.44%       5,125      0.33%
Passbook savings.......................         3,807     0.39%       3,645      0.30%
Certificates of deposit................        38,325     3.41%      28,466      3.24%
                                             --------              --------
     Total.............................      $ 51,826              $ 39,958
                                             ========              ========
</TABLE>

     At December  31,  2005,  time  certificates  in amounts of $100,000 or more
constituted  $9.0 million,  or 16.6%, of our total deposit base. The majority of
these  certificates  represent  deposits  from  long-standing   customers.   The
following  table  classifies our time  certificates  of $100,000 or more by time
remaining to maturity as of December 31, 2005.


                                       14
<PAGE>

                                                     CERTIFICATES
MATURITY PERIOD                                       OF DEPOSIT
---------------                                       ----------
                                                    (IN THOUSANDS)

Three months or less..............................      $1,558
Over three through six months.....................         591
Over six through 12 months........................       1,653
Over 12 months....................................       5,246
                                                        ------
                                                        $9,048
                                                        ======

     BORROWINGS.  Advances  (borrowings)  may  be  obtained  from  the  FHLB  of
Cincinnati to supplement our supply of lendable funds. Advances from the FHLB of
Cincinnati  are  typically  secured  by a  pledge  of our  stock  in the FHLB of
Cincinnati and a portion of our first mortgage  loans.  Each FHLB credit program
has its own  interest  rate,  which  may be fixed or  adjustable,  and  range of
maturities.  At December 31, 2005, our borrowings from the FHLB consisted of $13
million in short-term, variable-rate advances.

     The following table sets forth certain information at the dates and for the
periods  indicated  regarding  the  Bank's  FHLB  advances  which  were its only
category of borrowings outstanding during the past two fiscal years.
<TABLE>
<CAPTION>
                                                                                YEAR ENDED DECEMBER 31,
                                                                            -------------------------------
                                                                               2005                 2004
                                                                            ---------             ---------
                                                                                (DOLLARS IN THOUSANDS)
<S>                                                                         <C>                   <C>
Amounts outstanding at end of period.................................       $  13,000             $  13,000
Weighted average rate paid ..........................................            3.59%                 1.76%
Maximum amount of borrowings outstanding at any month end............       $  14,000             $  13,000
Average borrowings outstanding ......................................       $  11,197             $   7,717
Approximate weighted average rate paid ..............................            3.46%                 1.76%
</TABLE>

COMPETITION

     We compete for deposits with other insured  financial  institutions such as
local  commercial  banks,  thrift  institutions,  credit unions and  multi-state
regional  banks in our market  area.  We also  compete for funds with  insurance
products sold by local agents and  investment  products such as mutual funds and
other securities sold by local and regional brokers.  According to data from the
FDIC, we held approximately  9.9% of FDIC-insured  deposits in Hopkins County as
of June 30, 2005, the latest date for which such data was  available.  Such data
does not cover deposits held by credit unions. We have historically competed for
deposits by paying higher rates than our local competitors.

                                       15
<PAGE>
     Our  competition  for loans  depends on market  conditions  and the type of
lending. Our competition for residential mortgages comes primarily from mortgage
bankers and brokers who primarily originate long-term fixed-rate loans on behalf
of secondary market  investors.  While we also originate  long-term,  fixed-rate
loans on  behalf  of  secondary  market  investors,  our  principal  residential
mortgage  loan  offerings  are our various  ARM loans  which we market  based on
flexibility of terms and superior  service.  We compete  primarily against other
local depository institutions for commercial and multi-family real estate loans.
We  compete  for  these  lending  opportunities  primarily  on the  basis of our
flexibility and  responsiveness as a locally owned and oriented  community bank.
We compete  against other local  financial  institutions  and a variety of other
lenders including  finance  companies and automobile  dealers for consumer loans
and second mortgages.  We generally compete for these loans based on our variety
of lending solutions, customer relationships and quality of service.


                                   REGULATION

GENERAL

     As a federally chartered,  SAIF-insured  savings  institution,  the Bank is
subject to  extensive  regulation  by the OTS and the FDIC.  The Bank's  lending
activities  and other  investments  must comply with  various  federal and state
statutory and regulatory  requirements,  and the OTS  periodically  examines the
Bank for  compliance  with various  regulatory  requirements.  The FDIC also has
authority to conduct  periodic  examinations.  We must file reports with the OTS
describing  our  activities  and our  financial  condition,  and we must  obtain
approvals from regulatory authorities before entering into certain transactions,
such as the conversion or mergers with other financial institutions. We are also
subject to certain reserve requirements promulgated by the Board of Governors of
the Federal Reserve System ("Federal Reserve System"). Our relationship with our
depositors  and  borrowers  is also  regulated  to a great extent by federal and
state law,  especially in such matters as the ownership of savings  accounts and
the form and content of our mortgage documents.  This supervision and regulation
is primarily intended to protect depositors. The regulatory structure also gives
the  regulatory  authorities  extensive  discretion  in  connection  with  their
supervisory  and  enforcement  activities and  examination  policies,  including
policies with respect to the  classification  of assets and the establishment of
adequate loan loss reserves for regulatory purposes.  Any change in regulations,
whether  by the OTS,  the FDIC or any  other  government  agency,  could  have a
material adverse impact on our operations.

REGULATION OF THE BANK

     INSURANCE  OF  DEPOSITS.  The FDIC  maintains  two  separate  funds for the
insurance of deposits up to prescribed statutory limits. The Bank Insurance Fund
("BIF")  insures  the  deposits  of  commercial  banks and the SAIF  insures the
deposits  of  savings  associations.  We are a member of the  SAIF.  The FDIC is
authorized to establish  separate annual  assessment rates for deposit insurance
for members of the BIF and the SAIF. The FDIC may increase  assessment rates for
either  fund if  necessary  to restore  the fund's  ratio of reserves to insured
deposits to its target  level within a  reasonable  time and may  decrease  such
assessment  rates if such target level has been met. The FDIC has  established a
risk-based  assessment system for both SAIF and BIF members.  Under this system,
assessments are set within a range,  based on the risk the institution  poses to
its  deposit  insurance  fund.  This  risk  level  is  determined  based  on the
institution's  capital level and the FDIC's level of  supervisory  concern about
the institution.

     Under the Federal Deposit  Insurance  Reform Act of 2005,  which was signed
into law on  February  15,  2006:  (i) the Bank  Insurance  Fund and the Savings
Association Insurance Fund will be merged into a new combined fund, to be called
the Deposit  Insurance Fund effective  July 1, 2006,  (ii) the current  $100,000
deposit insurance coverage will be indexed for inflation (with adjustments every
five years,  commencing  January 1, 2011); and (iii) deposit insurance  coverage
for retirement accounts will be increased to $250,000 per participant subject to
adjustment for inflation. The FDIC will be given greater latitude in setting the
assessment  rates for insured  depository  institutions,  which could be used to
impose minimum assessments.

     The FDIC  will be  authorized  to set the  reserve  ratio  for the  Deposit
Insurance Fund annually at between 1.15% and 1.5% of estimated insured deposits.
If the Deposit  Insurance  Fund's reserves exceed the designated  reserve

                                       16
<PAGE>

ratio, the FDIC is required to pay out all or, if the reserve ratio is less than
1.5%, a portion of the excess as a dividend to insured  depository  institutions
based on the  percentage of insured  deposits held on December 31, 1996 adjusted
for subsequently  paid premiums.  Insured  depository  institutions that were in
existence on December 31, 1996 and paid assessments prior to that date (or their
successors) are entitled to a one-time credit against future  assessments  based
on their past contributions to the BIF or SAIF.

     REGULATORY CAPITAL  REQUIREMENTS.  OTS capital  regulations require savings
institutions to meet three capital  standards:  (1) tangible capital equal to at
least 1.5% of total adjusted assets,  (2) core capital equal to at least 4.0% of
total  adjusted  assets  (3.0% for the  strongest  institutions),  and (3) total
risk-based  capital  equal to at least 8.0% of total  risk-weighted  assets.  In
addition,  the OTS may  require  a  savings  institution  that has a  risk-based
capital ratio less than 8.0%, a ratio of Tier 1 capital to risk-weighted  assets
of less than 4.0% or a ratio of Tier 1 capital to adjusted  total assets of less
than 4.0% (3.0% if the  institution  has received the highest rating on its most
recent  examination) take certain actions to increase its capital ratios. If the
institution's  capital is significantly  below the minimum required levels or if
it is unsuccessful in increasing its capital ratios,  the OTS may  significantly
restrict its activities.

     Core capital is defined as common  stockholders' equity (including retained
earnings),  non-cumulative  perpetual  preferred stock and minority interests in
the equity  accounts  of  consolidated  subsidiaries,  certain  non-withdrawable
accounts and pledged  deposits of mutual  savings  associations  and  qualifying
supervisory   goodwill,   less  intangible   assets  (other  than  core  deposit
intangibles,  servicing  assets,  purchased credit card  relationships and other
qualifying  intangible assets) and investments in certain  subsidiaries.  Tier 1
has the same  definition  as core capital.  Tangible  capital is defined as core
capital less supervisory goodwill,  non-mortgage  servicing assets and purchased
credit card relationships and less certain investments in subsidiaries.

     Total risk-based  capital equals the sum of core capital plus supplementary
capital.  The components of supplementary  capital  include,  among other items,
cumulative  perpetual preferred stock,  perpetual  subordinated debt,  mandatory
convertible  subordinated  debt,  intermediate-term  preferred  stock,  and  the
portion of the  allowance  for loan  losses not  designated  for  specific  loan
losses.  Overall,  supplementary  capital is limited to 100% of core capital.  A
savings institution must calculate its risk-weighted  assets by multiplying each
asset and  off-balance  sheet item by various risk factors as  determined by the
OTS,  which  range  from 0% for  cash to 100%  for  delinquent  loans,  property
acquired through  foreclosure,  commercial  loans, and other assets. At December
31, 2005, we were in compliance with all regulatory capital requirements.

     The Bank  currently  meets the  criteria to be treated as well  capitalized
under  OTS  regulations.  As a well  capitalized  institution,  the  Bank is not
subject  to  various   sanctions   that  may  be  imposed  on   undercapitalized
institutions. As long as the Bank is well capitalized or adequately capitalized,
it may be eligible for expedited  treatment of its regulatory  applications  and
lower examination and deposit insurance assessment rates.

     DIVIDEND AND OTHER CAPITAL DISTRIBUTION  LIMITATIONS.  OTS regulations will
require  the  Bank  to  give  the OTS 30 days  advance  notice  of any  proposed
declaration  of dividends  to the  Company.  The OTS may prohibit the payment of
dividends  to the Company.  In addition,  the Bank may not declare or pay a cash
dividend  on its  capital  stock  if the  effect  would  be to  reduce  the Bank
regulatory  capital below the amount required for the liquidation  account to be
established at the time of the conversion.

     Savings  associations  must  submit  notice  to the OTS  prior to  making a
capital  distribution (which includes  dividends,  stock repurchases and amounts
paid to stockholders in another  institution in a cash merger) if (a) they would
not be well  capitalized  after the  distribution,  (b) the  distribution  would
result in the retirement of any of the  association's  common or preferred stock
or  debt  counted  as its  regulatory  capital,  or  (c)  the  association  is a
subsidiary of a holding company. A savings  association must make application to
the OTS to pay a  capital  distribution  if (x)  the  association  would  not be
adequately  capitalized following the distribution,  (y) the association's total
distributions  for the calendar year exceed the association's net income for the
calendar year to date plus its net income (less distributions) for the preceding
two years, or (z) the  distribution  would otherwise  violate  applicable law or
regulation or an agreement with or condition imposed by the OTS.

                                       17
<PAGE>
     A savings institution is prohibited from making a capital  distribution if,
after making the distribution, the savings institution would be undercapitalized
(i.e.,  not  meet  any  one of its  minimum  regulatory  capital  requirements).
Further,  a savings  institution  cannot distribute  regulatory  capital that is
needed for its liquidation account.

     QUALIFIED THRIFT LENDER TEST.  Savings  institutions  must meet a Qualified
Thrift Lender test.  To satisfy the test,  the Bank must either (i) qualify as a
"domestic  building and loan  association"  under the  Internal  Revenue Code by
maintaining  at least 60% of our  total  assets in  specified  types of  assets,
including cash, certain government securities, loans secured by and other assets
related to  residential  real  property,  educational  loans and  investments in
premises  of the  institution  or  (ii)  maintain  at  least  65% of the  Bank's
portfolio  assets  (total  assets  less  intangible  assets,  property we use in
conducting  our business  and liquid  assets in an amount not  exceeding  20% of
total assets) in Qualified  Thrift  Investments.  Qualified  Thrift  Investments
consist primarily of residential  mortgage loans and  mortgage-backed  and other
securities related to domestic, residential real estate or manufactured housing.
The  shares of stock the Bank owns in the FHLB of  Cincinnati  also  qualify  as
Qualified Thrift Investments.  Subject to an aggregate limit of 20% of portfolio
assets, we may also count the following as Qualified Thrift Investments: (i) 50%
of the dollar amount of  residential  mortgage loans  originated for sale,  (ii)
investments in the capital stock or  obligations  of any service  corporation or
operating  subsidiary  as long as such  subsidiary  derives  at least 80% of its
revenues  from domestic  housing  related  activities,  (iii) 200% of the dollar
amount of loans and  investments  to  purchase,  construct  or develop  "starter
homes," subject to certain other restrictions, (iv) 200% of the dollar amount of
loans for the purchase,  construction  or  development  of domestic  residential
housing  or  community  centers  in  "credit  needy"  areas or loans  for  small
businesses  located in such areas,  (v) loans for the purchase,  construction or
development of community centers, (vi) loans for personal,  family, household or
educational purposes, subject to a maximum of 10% of portfolio assets, and (vii)
shares of the Federal Home Loan  Mortgage  Corporation  or the Federal  National
Mortgage Association stock.

     If the Bank  satisfies  the test,  the Bank  will  continue  to enjoy  full
borrowing  privileges from the FHLB of Cincinnati.  If the Bank does not satisfy
the test,  it may lose its borrowing  restrictions  and be subject to activities
and branching  restrictions  applicable to national  banks.  Compliance with the
Qualified  Thrift  Lender test is  determined  on a monthly basis in nine out of
every 12 months.  As of December 31, 2005,  the Bank was in compliance  with the
Qualified Thrift Lender requirement.

     TRANSACTIONS  WITH AFFILIATES.  Generally,  transactions  between a savings
institution  and  its  affiliates  are  subject  to  certain  limitations.  Such
transactions  must be on  terms  as  favorable  to the  savings  institution  as
comparable  transactions  with  non-affiliates.  In addition,  certain  types of
transactions   are  restricted  to  an  aggregate   percentage  of  the  savings
institution's capital.  Collateral in specified amounts must usually be provided
by affiliates in order to receive loans from the savings institution. The Bank's
affiliates  include  the Company  and any  company  which would be under  common
control with the Bank. In addition,  a savings institution may not extend credit
to any  affiliate  engaged in  activities  not  permissible  for a bank  holding
company or acquire the securities of any affiliate that is not a subsidiary. The
OTS  has  the  discretion  to  treat  subsidiaries  of  savings  institution  as
affiliates on a case-by-case basis.

     LOANS TO  DIRECTORS,  EXECUTIVE  OFFICERS AND PRINCIPAL  STOCKHOLDERS.  The
Bank's loans to its directors, executive officers and our principal stockholders
may not be made on terms more favorable than those afforded to other  borrowers,
except loans made as part of a benefit or compensation  program widely available
to the  Bank's  employees  and which  does not give more  preferential  terms to
directors, executive officers or principal stockholders than to other employees.
In  addition,  the Bank  cannot  make  loans in  excess  of  certain  levels  to
directors,  executive  officers or 10% or greater  stockholders (or any of their
affiliates) unless the loan is approved in advance by a majority of the Board of
Directors with any "interested" director not voting. We are also prohibited from
paying any overdraft of any of our executive officers or directors.  We are also
subject  to  certain  other  restrictions  on the  amount  and  type of loans to
executive  officers and  directors  and must  annually  report such loans to our
regulators.

     FEDERAL  HOME  LOAN  BANK  SYSTEM.  The  Bank is a  member  of the  FHLB of
Cincinnati,  which is one of 12 regional FHLBs. Each FHLB serves as a reserve or
central bank for its members within its assigned region.  It is funded primarily
from funds deposited by savings  institutions and proceeds derived from the sale
of consolidated obligations of the FHLB System. It makes loans to members (i.e.,
advances) in accordance with policies and procedures established by the Board of
Directors of the FHLB.

                                       18
<PAGE>

     As a member,  the Bank is required to purchase  and  maintain  stock in the
FHLB of  Cincinnati  in an amount equal to at least 1% of its  aggregate  unpaid
residential  mortgage loans, home purchase  contracts or similar  obligations at
the beginning of each year, or 1/20 of its advances from the FHLB of Cincinnati,
whichever is greater. At December 31, 2005, the Bank had $721,900 in FHLB stock,
at cost, which was in compliance with this requirement.

     FEDERAL RESERVE SYSTEM.  The Federal Reserve System requires all depository
institutions  to maintain  non-interest  bearing  reserves at  specified  levels
against  their  transaction  accounts  (primarily  checking,  NOW and  Super NOW
checking accounts) and non-personal time certificates. At December 31, 2005, the
Bank's reserves met the minimum level required by the Federal Reserve System.

REGULATION OF THE COMPANY

     GENERAL.  The Company is  registered  and required to file reports with the
OTS and is subject to regulation and  examination  by the OTS. In addition,  the
OTS has enforcement  authority over the Company and any non-savings  institution
subsidiaries.  This permits the OTS to restrict or prohibit  activities  that it
determines  to be a  serious  risk to the  Bank.  This  regulation  is  intended
primarily for the protection of the Bank's depositors and not for the benefit of
stockholders.  The Company is also required to file certain  reports  with,  and
comply with the rules and regulations  of, the SEC under the federal  securities
laws.

     ACTIVITIES RESTRICTIONS. As a savings and loan holding company formed after
May 4, 1999,  the  Company  and its  non-savings  association  subsidiaries  are
subject to statutory and regulatory  restrictions on their business  activities.
Under the Home Owners' Loan Act, as amended by the  Gramm-Leach-Bliley  Act (the
"GLB Act"), the non-banking  activities of the Company are restricted to certain
activities  specified by statute or OTS  regulation,  which  include  performing
services  and  holding  properties  used by a  savings  association  subsidiary,
activities  authorized  for multiple  savings and loan  holding  companies as of
March 5, 1987, and non-banking activities permissible for bank holding companies
pursuant to the Bank Holding  Company Act of 1956 (the "BHC Act") or  authorized
for financial holding companies pursuant to the GLB Act. Furthermore, no company
may  acquire  control of the Bank  unless the  acquiring  company  was a unitary
savings and loan holding company on May 4, 1999 (or became a unitary savings and
loan holding company pursuant to an application  pending as of that date) or the
company is only engaged in activities  that are  permitted for multiple  savings
and loan holding  companies or for financial holding companies under the BHC Act
as amended by the GLB Act.

     RESTRICTIONS ON ACQUISITIONS. The Company must obtain approval from the OTS
before  acquiring  control of any other savings  institution or savings and loan
holding company,  substantially all the assets thereof or in excess of 5% of the
outstanding  shares of another  savings  institution or savings and loan holding
company.  The Company's  directors and officers or persons owning or controlling
more than 25% of the Company's stock must also obtain approval of the OTS before
acquiring  control  of any  savings  institution  or  savings  and loan  holding
company.

     The OTS may only approve  acquisitions that will result in the formation of
a multiple savings and loan holding company which controls savings  institutions
in more than one state if: (i) the  multiple  savings and loan  holding  company
involved  controls a savings  institution which operated a home or branch office
in the state of the  institution  to be acquired  as of March 5, 1987;  (ii) the
acquiror is authorized to acquire control of the savings institution pursuant to
the emergency  acquisition  provisions of the Federal Deposit  Insurance Act; or
(iii) the  statutes  of the state in which the  institution  to be  acquired  is
located  specifically  permit  institutions  to be acquired  by  state-chartered
institutions  or savings and loan holding  companies  located in the state where
the  acquiring  entity is located (or by a holding  company that  controls  such
state-chartered savings institutions).

                                       19
<PAGE>

ITEM 2. DESCRIPTION OF PROPERTY
-------------------------------

     The  following  table  sets forth  certain  information  regarding  our two
offices.
<TABLE>
<CAPTION>
                                                        BOOK VALUE AT
                               YEAR       OWNED OR       DECEMBER 31,       APPROXIMATE
                              OPENED       LEASED           2005          SQUARE FOOTAGE
                              ------      --------      -------------     --------------
                                                     (DOLLARS IN THOUSANDS)
<S>                            <C>         <C>           <C>                   <C>
MAIN OFFICE:
2420 North Main Street
Madisonville, KY  42431        2004         Owned        $1,305                8,400

BRANCH OFFICE:
240 South Main Street
Madisonville, KY 42431         1959         Owned         $ 719                4,200
</TABLE>

     The book value of the Bank's  investments in premises and equipment totaled
$2,024,000 at December 31, 2005. See Note 5 of Notes to  Consolidated  Financial
Statements.

ITEM 3. LEGAL PROCEEDINGS
-------------------------

     We are,  from time to time,  a party to legal  proceedings  arising  in the
ordinary  course of our business,  including  legal  proceedings  to enforce our
rights against borrowers.  We are not currently a party to any legal proceedings
which  are  expected  to  have  a  material  adverse  effect  on  our  financial
statements.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
-----------------------------------------------------------

     There were no matters  submitted to a vote of the security  holders  during
the fourth quarter of fiscal year 2005.

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
----------------------------------------------------------------

     (a)  MARKET  INFORMATION.  The  Company's  common  stock is  quoted  on the
Over-the-Counter   Bulletin  Board  ("OTCBB")  under  the  symbol:  "CFBC."  The
following table sets forth high and low sales information  reported on the OTCBB
for the Common Stock for each quarter  during the past two fiscal  years.  These
quotes reflect  inter-dealer prices without mark-ups,  mark-downs or commissions
and may not necessarily reflect actual transactions.
<TABLE>
<CAPTION>
                                                               2005                               2004
                                                     -----------------------           ------------------------
                                                      HIGH              LOW             HIGH              LOW
                                                      ----              ---             ----              ---
                  <S>                                <C>               <C>             <C>               <C>
                  Fourth Quarter                     $10.90            $9.00           $14.25            $13.25
                  Third Quarter                       11.50            10.90            15.00             13.40
                  Second Quarter                      12.75            10.75            18.44             15.00
                  First Quarter                       13.50            12.50            20.00             13.85
</TABLE>

     HOLDERS.  As of December  31,  2005,  there were 128 record  holders of the
Common Stock.

     DIVIDENDS.  The Company has not paid any dividends on the Common Stock. The
Company's ability to pay dividends is dependent on the receipt of dividends from
the  Bank.  The Bank is  subject  to  certain  restrictions  on the  payment  of
dividends pursuant to federal banking law.

     (b)  USE OF PROCEEDS. Not applicable.

     (c)  ISSUER PURCHASES OF EQUITY SECURITIES. Not applicable.


                                       20
<PAGE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
-----------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                 AT OR FOR THE YEAR ENDED DECEMBER 31,
                                                              ------------------------------------------
                                                                2005              2004            2003
                                                              --------          --------        --------
                                                                (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                           <C>               <C>              <C>
SELECTED FINANCIAL CONDITION DATA:
     Assets.................................................  $  71,729         $ 63,503         $  42,541
     Loans receivable, net..................................     64,578           51,932            35,066
     Cash and cash equivalents..............................      2,009            5,793             1,109
     Investment securities:
         Available-for-sale.................................      1,703            2,215             1,976
         Held-to-maturity...................................         66               89             1,424
     Deposits...............................................     54,477           46,466            33,172
     Advances from Federal Home Loan Bank...................     13,000           13,000             5,000
     Stockholders' equity...................................      2,720            3,164             4,209

SELECTED OPERATIONS DATA:
     Interest income........................................  $   3,556         $  2,692         $   2,182
     Interest expense.......................................      1,783            1,079               833
                                                              ---------         --------         ---------
         Net interest income................................      1,773            1,613             1,349
     Provision for loan losses..............................         79              164                82
                                                              ---------         --------         ---------
         Net interest income after provision for
             loan losses....................................      1,694            1,449             1,267
     Other income...........................................        346              216               195
     Other expenses.........................................      2,479            2,581             1,564
                                                              ---------         --------         ---------
         Income (loss) before federal income tax
             expense (benefit)..............................       (439)            (916)             (102)
     Federal income tax expense (benefit)...................         --              116              (116)
                                                              ---------         --------         ---------
         Net income (loss)..................................  $    (439)        $ (1,032)        $      14
                                                              =========         ========         =========

PER SHARE DATA:
     Earnings per share - Basic.............................  $   (1.58)        $  (3.71)        $    0.05
     Earnings per share - Diluted...........................      (1.58)           (3.71)             0.05
     Book value per share...................................       9.79            11.40             15.15
PERFORMANCE RATIOS:
     Return on average assets...............................      (0.65)%          (2.00)%            0.03%
     Return on average equity...............................     (11.41)          (27.85)             0.33
     Interest rate spread...................................       2.65             3.41              3.20
     Net interest margin....................................       2.85             3.48              3.43
     Ratio of average interest-earning assets to average
        interest-bearing liabilities........................     105.18           103.09            110.83
     Ratio of noninterest expense to average total assets...       3.69             5.00              3.78

ASSET QUALITY RATIOS:
     Nonperforming assets to total assets at end of period..       0.43             0.46              0.11
     Nonperforming loans to total loans at end of period....       0.47             0.57              0.13
     Allowance for loan losses to total loans at end
        of period...........................................       0.60             0.61              0.51
     Allowance for loan losses to nonperforming loans
        at end of period....................................     126.80           108.09            376.99
     Net charge-offs to average loans outstanding...........       0.02             0.06              0.02

CAPITAL RATIOS:
     Equity to total assets at end of period................       3.79             4.95              9.89
     Average equity to average assets.......................       4.36             7.18             10.03
     Tangible capital.......................................       5.47             6.05              9.73
     Core capital...........................................       5.47             6.05              9.73
     Total risk-based capital...............................      10.22            11.78             18.91
</TABLE>

                                       21
<PAGE>

     Management's  discussion and analysis of financial condition and results of
operations is intended to assist you in  understanding  our financial  condition
and results of operations.  The  information in this section should also be read
with  our  Consolidated  Financial  Statements  and  Notes  to the  Consolidated
Financial Statements, which are included elsewhere in this document.

COMMUNITY FIRST BANCORP, INC.

     Community  First Bancorp,  Inc. is the holding  company for Community First
Bank, a federal savings bank headquartered in Madisonville,  Kentucky. Community
First Bank  operates from its main office at 2420 North Main Street and a branch
office at 240 South Main Street, both in Madisonville, Kentucky. Community First
Bank's lending  activities consist primarily of the origination of loans secured
by  residential  and  commercial  properties  in  its  primary  market  area  of
Madisonville.  Since we went public in 2003,  we have nearly  doubled our assets
making us one of the fastest growing financial  institutions in the Commonwealth
of Kentucky  during this period.  At December  31, 2005,  we had total assets of
approximately  $71.7  million,  loans  of  $64.6  million  (net of  allowances),
deposits of $54.2 million and stockholders equity of $2.7 million.

     We  incurred a loss of  approximately  $439,500  for the fiscal  year ended
December 31, 2005 and $1.03 million for the year ended December 31, 2004.  These
losses are primarily attributable to the increase in overhead resulting from the
opening  of our new main  office in March  2004 and  expenses  related  our data
processor conversion.  Although our loss narrowed in the current year, we do not
expect to achieve full  profitability  without  substantial  additional  growth.
Accordingly,  the Company is seeking to raise  additional  equity capital.  With
additional capital, we believe that we can continue to grow the Bank to the size
necessary to achieve profitability.

MANAGEMENT STRATEGY

     Founded in 1923 as the Madisonville  Building & Loan Association,  the Bank
historically  operated  as a  traditional  thrift  from its  South  Main  Street
location,  offering  long-term  mortgages  and  small  consumer  loans  to local
residents.  As the profitability of this business came under increasing pressure
during the 1990s, the Bank suffered continuing losses, which severely eroded its
capital base.  In late 2001,  the Board of Directors  brought in Mr.  William M.
Tandy,  who had extensive prior  experience in bank  turn-arounds,  to take over
management of the Bank.  Under Mr. Tandy's  leadership,  the Bank has executed a
multi-pronged  strategy to re-invigorate  its franchise and enable it to compete
more effectively. The principal elements of this strategy have included:

     GROWING AND  DIVERSIFYING  THE LOAN  PORTFOLIO.  In order to  increase  the
profitability of the Bank,  management has sought to grow the loan portfolio and
to   diversify   it  into   more   profitable   lines  of   business   than  the
one-to-four-family  lending which historically dominated the portfolio. With the
capital  from  its 2003  conversion  to stock  form,  the Bank has been  able to
significantly  increase its commercial and commercial  mortgage lending.  As the
result of its  conversion  to a new computer  system in 2004,  the Bank has also
gained the  capability of offering lines of credit and other forms of lending on
which higher rates may be charged.

     DEVELOPMENT OF NON-INTEREST INCOME SOURCES.  Like most thrift institutions,
the Bank has  traditionally  relied on net interest income (i.e., the difference
between the interest  earned on its loan and securities  portfolios and interest
paid on its deposits and borrowings) to cover its operating expenses  (salaries,
occupancy, data processing,  etc.). In order to diversify our income sources and
create income  streams that are less affected by changes in interest  rates,  we
have sought to develop various additional types of non-interest income including
fees for various loan and deposit services and commission income.

     MODERNIZATION OF FACILITIES. In 2004, the Bank relocated its main office to
a modern building in a faster-growing part of Madisonville.  The new main office
has drive-up facilities and more convenient hours. We had previously extensively
remodeled our South Main Street office to make it more  convenient and appealing
to  customers.  These more  modern  facilities  have  enabled us to attract  new
customers and better serve existing customers.

     IMPROVE  MARKET  AWARENESS.  In 2002,  the Bank adopted its current name to
better reflect its community  focus and the products it offers.  The name change
was  accompanied  by a  marketing  campaign  to help  establish  the  Bank's new
identity and create greater market awareness of the Bank. The Bank has continued
to be actively  involved in the  community  and believes that these efforts have
helped build further customer identification and loyalty.

                                       22
<PAGE>

     As a result of the foregoing  strategies,  we have  successfully  grown our
assets and our net interest income and other income over the past several years.
Despite our success in growing the Bank, however, we have incurred losses as our
income  growth  has not been  sufficient  to offset the  increased  non-interest
expenses  resulting from our new main office.  During 2004, we also  experienced
significant  non-recurring  charges  related  to  the  conversion  of  our  data
processor.  In addition,  we believe that our  profitability has been negatively
affected by the recent  flattening of the yield curve,  which began in June 2004
when the Federal  Reserve Board  initiated a series of interest rate  increases.
The Federal  Reserve's  actions have  triggered an increase in short-term  rates
which has  primarily  affected the rates we pay on our  deposits and  borrowings
while the long-term rates which determine the pricing of our loans have remained
fairly constant.

     Management's  strategy for achieving  profitability  continues to emphasize
growth.  Management  believes  that its  success in growing  the loan  portfolio
demonstrates  that loan  demand in its  market  area is  sufficient  to  support
further growth. The Company has previously borrowed funds from its directors and
another  financial  institution in order to fund a capital  contribution  to the
Bank, but has determined that more permanent capital was needed to fully achieve
its growth objectives and is seeking to raise equity capital.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

     ALLOWANCE FOR LOAN LOSSES. The Company's  consolidated financial statements
are prepared in accordance with accounting  principles generally accepted in the
United  States and  follow  general  practices  within  the  financial  services
industry.  The most significant  accounting policies followed by the Company are
presented in Note 1 to the consolidated  financial  statements.  These policies,
along with the disclosures  presented in the other financial statement notes and
in this financial  review,  provide  information on how  significant  assets and
liabilities  are valued in the  financial  statements  and how those  values are
determined.  Based  on the  valuation  techniques  used and the  sensitivity  of
financial  statement  amounts  to  the  methods,   assumptions,   and  estimates
underlying  those amounts,  management has identified the  determination  of the
allowance  for loan  losses to be the  accounting  area that  requires  the most
subjective or complex  judgments,  and as such could be most subject to revision
as new information becomes available.

     The allowance for loan losses represents  management's estimate of probable
credit  losses  inherent in the loan  portfolio.  Determining  the amount of the
allowance for loan losses is considered a critical  accounting  estimate because
it requires  significant judgment and the use of estimates related to the amount
and timing of expected future cash flows on impaired loans,  estimated losses on
loans based on historical loss experience, and consideration of current economic
trends and conditions, all of which may be susceptible to significant change.

     The  loan  portfolio  also   represents  the  largest  asset  type  on  the
consolidated  balance sheet.  Note 1 to the  consolidated  financial  statements
describes the methodology used to determine the allowance for loan losses, and a
discussion  of the factors  driving  changes in the amount of the  allowance for
loan losses is included under Asset Quality below.

     Loans that exhibit  probable or observed  credit  weaknesses are subject to
individual review. Where appropriate, reserves are allocated to individual loans
based on management's estimate of the borrower's ability to repay the loan given
the  availability  of  collateral,  other sources of cash flow and legal options
available to the Company.  Included in the review of individual  loans are those
that are  impaired as provided in SFAS No. 114,  "Accounting  by  Creditors  for
Impairment  of a  Loan."  The  Company  evaluates  the  collectibility  of  both
principal and interest when assessing the need for a loss accrual. Historical or
industry  loss  rates  are  applied  to  other  loans  not  subject  to  reserve
allocations.  These  historical  or  industry  loss  rates may be  adjusted  for
significant  factors that, in management's  judgment,  reflect the impact of any
current  conditions on loss recognition.  Factors which management  considers in
the analysis include the effects of the national and local economies,  trends in
the  nature  and  volume of loans  (delinquencies,  charge-offs  and  nonaccrual
loans),  changes  in  mix,  asset  quality  trends,  risk  management  and  loan
administration,  changes in internal lending policies and credit standards,  and
examination  results  from bank  regulatory  agencies  and our  internal  credit
examiners.

     An  unallocated  reserve is  maintained  to recognize  the  imprecision  in
estimating and measuring loss when evaluating  reserves for individual  loans or
pools of loans.  Reserves on  individual  loans and  historical or industry loss
rates are  reviewed  quarterly  and  adjusted  as  necessary  based on  changing
borrower  and/or  collateral  conditions  and actual  collection  and charge-off
experience.

                                       23
<PAGE>

     The  Company  has not  substantively  changed  any  aspect  of its  overall
approach in the determination of the allowance for loan losses.  There have been
no material changes in assumptions or estimation techniques as compared to prior
periods that impacted the determination of the current period allowance.

     Based on the procedures discussed above,  management is of the opinion that
the reserve of $387,800 was adequate,  but not  excessive,  to absorb  estimated
credit losses associated with the loan portfolio at December 31, 2005.

     DEFERRED INCOME TAXES. We have a deferred tax asset of $16,600. We evaluate
this asset on a quarterly basis. To the extent we believe it is more likely than
not that it will not be utilized,  we establish a valuation  allowance to reduce
its  carrying  amount to the amount we expect to be  realized.  At December  31,
2005, the valuation allowance is $566,860. The estimate of the realizable amount
of this asset is a critical accounting policy.

COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 2005 AND DECEMBER 31, 2004

     The Company's  total assets as of December 31, 2005 were $71.7 million,  an
increase  of $8.2  million  or 12.9% from  December  31,  2004's  level of $63.5
million.  The increase was due primarily to growth in the loan  portfolio,  more
specifically  an increase  in  one-to-four  family  first  mortgage  loans which
increased  $8.0  million,  or 20.1%.  Net loans  receivable  increased  by $12.6
million, or 24.3%, which reflected our continued  marketing efforts.  Commercial
mortgage  loans  increased  $4.4 million or 149.1% and increased to 11.3% of the
portfolio  from 5.6% at December 31, 2004. The Company's  investment  securities
decreased  by  $535,000,  or 23.2%,  to $1.8 million at December 31, 2005 due to
maturities  of  securities  as the Bank  used  cash  flows  from the  securities
portfolio to pay down FHLB advances.  Premises and equipment decreased $209,300,
or 8.3%, primarily due to a full year's depreciation on the new main office. The
Company's cash and cash equivalents as of December 31, 2005 were $2.0 million, a
decrease of $3.8 million from December 31,  2004's level of $5.8  million.  This
decrease is due  primarily  to the maturity of $3.0 million in Federal Home Loan
Bank  certificates of deposit that served as pledged  collateral for several new
accounts with the Hopkins County Sheriff's Department.  The Sheriff's Department
accounts housed the collection of county property taxes.

     Liabilities  increased  by $8.7  million,  or 14.4%,  to $69.0  million due
primarily  to a $7.8  million,  or  16.7%,  increase  in  deposits  as the  Bank
continued  to attract  deposits  locally at  favorable  rates.  The  increase in
deposits came  primarily  from checking  accounts and  certificates  of deposit.
Federal Home Loan Bank  advances of $13.0  million  remained at the December 31,
2004 level of $13.0  million.  The Bank has used  proceeds  from the advances to
help meet  loan  demand.  Advances  under the  Company's  line of credit  from a
correspondent  bank  increased to $850,000 at December 31, 2005 from $750,000 at
December 31, 2004. In addition, the Company had $400,000 in loans from directors
at December 31, 2005. These borrowings were used to fund a capital  contribution
to the Bank.

     Stockholders'  equity  decreased  to $2.7 million at December 31, 2005 from
$3.2  million at  December  31,  2004.  The  decrease  in  stockholders'  equity
principally reflects $439,500 in losses during the period.

COMPARISON  OF RESULTS OF OPERATIONS  FOR THE YEARS ENDED  DECEMBER 31, 2005 AND
2004

     GENERAL.  Net  loss for the  year  ended  December  31,  2005 was  $439,500
($(1.58) per diluted share) compared to a net loss of $(1,032,000)  ($(3.71) per
diluted share) for the year ended December 31, 2004. The improvement in loss for
the 2005 period  reflected  increases  in net interest  income and  non-interest
income,  a lower  provision  for loan  losses,  and a decrease  in  non-interest
expense.

     NET INTEREST INCOME.  The primary component of the Bank's net income is its
net interest income,  which is the difference  between interest income earned on
loans and investments  and interest  expense paid on the deposits and borrowings
used to fund the interest  earning assets.  Net interest income is determined by
the spread between the yields earned on the Bank's  interest-earning  assets and
the rates paid on  interest-bearing  liabilities as well as the relative amounts
of  such  assets  and  liabilities.  Net  interest  income  divided  by  average
interest-earning assets represents the Bank's net interest margin.

     For the year  ended  December  31,  2005,  net  interest  income  increased
approximately $160,000, or 9.9%, compared to the prior year. The increase in net
interest  income during the 2005 period was  attributable  to a higher volume of
loans. Interest income increased  approximately $864,200, or 32.1%, for the year
ended  December  31,  2005,  while  interest  expense  increased   approximately
$704,400,  or 65.3%. The increase in interest income reflects a higher volume of
interest-earning   assets   and  a  shift  in   interest-earning   assets   into
higher-yielding  loans.  During  the

                                       24
<PAGE>

year ended  December 31, 2005,  net loans  averaged $58.5 million as compared to
$42.6  million  during  fiscal year 2004, an increase of $15.9 million or 37.3%.
While the average yield on the loan  portfolio  declined  during 2005,  interest
income increased by $864,000 due to higher outstanding loan balances.

     The  increased  income  from loans  helped  offset an  increase in interest
expense of $704,400 or 65.3% for the year ended  December 31, 2005. The increase
in interest  expense  reflects both a higher volume of deposits and increases in
short-term rates as the result of the Federal  Reserve's eleven increases in the
targeted  Federal  Funds rate since June 30,  2004.  Interest  expense  has also
increased due to the Bank's greater use of FHLB  borrowings to fund loan growth,
as well as the  Company's  use of a revolving  line of credit with The  Banker's
Bank to provide additional capital for the Bank. Reflecting the recent increases
in  short-term  interest  rates,  which have not been  accompanied  by increased
long-term rates, the Bank's interest rate spread decreased to 2.65% for the year
ended  December 31, 2005 compared to 3.41% for the year ended December 31, 2004.
Net interest margin decreased to 2.85% for the 2005 period compared to 3.48% for
the 2004 period.

     During the year ended  December  31, 2005,  the Bank  reported net interest
income,  before  provision  for loan losses,  of $1.8 million.  Interest  income
consisted of $3.5 million in interest and fees on loans,  $80,700 in interest on
investment  securities,  and $35,700 in dividends on FHLB stock,  totaling  $3.5
million,  while interest expense, which consisted of $1.3 million in interest on
deposits and $442,500 in interest on FHLB advances and other borrowings, totaled
$1.8 million.

     During the year ended  December  31, 2004,  the Bank  reported net interest
income,  before  provision  for loan losses,  of $1.6 million.  Interest  income
consisted of $2.6 million in interest and fees on loans,  $90,000 in interest on
investment  securities,  and $27,000 in dividends on FHLB stock,  totaling  $2.7
million,  while  interest  expense,  which  consisted of $950,000 in interest on
deposits and $129,000 in interest on FHLB advances and other borrowings, totaled
$1.1 million.

     The following table sets forth certain information  relating to our average
balance  sheet and  reflects  the average  yield on assets and  average  cost of
liabilities  for the periods  indicated and the average  yields earned and rates
paid at the date and for the  periods  indicated.  Such  yields  and  costs  are
derived by dividing  income or expense by the average daily balance of assets or
liabilities, respectively, for the periods presented.
<TABLE>
<CAPTION>
                                                                              YEAR ENDED DECEMBER 31,
                                                    ---------------------------------------------------------------------------
                                                                    2005                                    2004
                                                    -------------------------------------     ---------------------------------
                                                                                 AVERAGE                                AVERAGE
                                                      AVERAGE                    YIELD/       AVERAGE                   YIELD/
                                                      BALANCE      INTEREST        COST       BALANCE      INTEREST       COST
                                                      -------      --------        ----       -------      --------       ----
                                                                               (DOLLARS IN THOUSANDS)
<S>                                                  <C>            <C>            <C>          <C>          <C>          <C>
   Interest-earning assets:
    Loans receivable, net(1)..................       $58,486        $3,439         5.88%        $42,637      $2,575       6.04%
    Investment securities.....................         2,926            81         2.77           3,140          90       2.87
    Other investments.........................           702            36         5.13             564          27       4.79
                                                    --------        ------                      -------      ------
       Total interest-earning assets..........        62,114         3,509         5.72          46,341       2,692       5.81
   Non-interest-earning assets................         5,059                                      5,279
                                                    --------                                    -------
       Total assets...........................       $67,173                                    $51,620
                                                     =======                                    =======
   Interest-bearing liabilities:
    Deposits..................................       $46,858         1,341         2.86         $37,236         950       2.55
    Borrowings................................        12,197           446         3.66           7,717         129       1.67
                                                    --------        ------                      -------      ------
       Total interest-bearing liabilities.....        59,055         1,787         3.03          44,953       1,079       2.40
   Non-interest-bearing liabilities...........         5,188                                      2,963
                                                    --------                                    -------
       Total liabilities......................        64,243                                     47,916
   Total stockholders' equity.................         2,930                                      3,705
                                                    --------                                    -------
       Total liabilities and stockholders' equity    $67,173                                    $51,620
                                                     =======                                    =======
   Net interest income........................                      $1,769                                   $1,613
                                                                    ======                                   ======
   Interest rate spread.......................                                     2.65%                                  3.41%
                                                                                 ======                                 ======
   Net interest margin........................                                     2.85%                                  3.48%
                                                                                 ======                                 ======
   Ratio of average interest-earning assets to
      average interest-bearing liabilities....                                   105.18%                                103.09%
                                                                                 ======                                 ======
<FN>

----------------
(1)  Non-accrual loans are included in average balances, less allowance for loan
     losses and deferred fees.
</FN>
</TABLE>

                                       25
<PAGE>

     The table  below  sets  forth  certain  information  regarding  changes  in
interest income and interest expense of the Bank for the periods indicated.  For
each  category  of  interest-earning   asset  and  interest-bearing   liability,
information  is  provided  on changes  attributable  to:  (i)  changes in volume
(changes in volume  multiplied by old rate); and (ii) changes in rate (change in
rate  multiplied  by old  volume).  Changes  in  rate-volume  (changes  in  rate
multiplied by the changes in volume) are allocated  between  changes in rate and
changes in volume proportionately.
<TABLE>
<CAPTION>
                                                   YEAR ENDED DECEMBER 31,                 YEAR ENDED DECEMBER 31,
                                            ----------------------------------         --------------------------------
                                                       2005 VS. 2004                             2004 VS. 2003
                                            ----------------------------------         --------------------------------
                                             INCREASE (DECREASE)                       INCREASE (DECREASE)
                                             -------------------                       -------------------
                                                   DUE TO                                    DUE TO
                                            ----------------------------------         --------------------------------
                                            VOLUME         RATE          TOTAL         VOLUME        RATE         TOTAL
                                            ------         ----          -----         ------        ----         -----
                                                                          (IN THOUSANDS)
<S>                                         <C>           <C>           <C>            <C>           <C>          <C>
Interest income:
   Loans..................................  $  957        $ (140)       $  817         $  492        $  43        $ 535
   Investment securities..................      (6)           (3)           (9)            (9)         (17)         (26)
   Other investments......................       7             2             9             (1)           2            1
                                            ------        ------        ------         ------        -----        -----
      Total interest-earning assets.......     958          (141)          817            482           28          510
                                            ------        ------        ------         ------        -----        -----

Interest expense:
   Deposits...............................  $  245        $  146        $  391         $  146        $ (11)       $ 135
   Borrowings.............................      69           245           314             28           81          109
                                            ------        ------        ------         ------        -----        -----
      Total interest-bearing
        Liabilities.......................     314           391           705            174           70          244
                                            ------        ------        ------         ------        -----        -----
Change in net interest income.............  $  644        $ (532)       $  112         $  308        $ (42)       $ 266
                                            ======        ======        ======         ======        =====        =====
</TABLE>

     PROVISION FOR LOAN LOSSES. The provision for loan losses for the year ended
December 31, 2005 was $79,000,  compared to $164,000 for the year ended December
31,  2004.  Net  charge-offs  for the year ended  December 31, 2005 were $10,000
(0.02% of average  loans),  compared to $24,000  (0.05% of average loans) during
the year ended  December 31, 2004. The ratio of the allowance for loan losses to
total loans was 0.60% at December  31,  2005  compared to 0.61% at December  31,
2004.  The  allowance  for loan  losses is  management's  estimate  of  probable
inherent credit losses in the loan portfolio at the balance sheet date. The Bank
determines  the  allowance  based  on  ongoing  evaluations.  Increases  to  the
allowance  are  made by  charges  to the  provision  for loan  losses,  which is
reflected in the statement of operations.  Loans deemed to be uncollectible  are
charged against the allowance.  Recoveries of loans  previously  charged off are
credited  to the  allowance.  The Bank  increased  the  amount of the  allowance
allocated  to various  forms of  consumer  loans,  and  reduced  the  proportion
allocated to residential  first mortgages  reflecting  changes in the portfolio.
Reserves are provided for consumer and  residential  loans based on average loss
experience,  applied  to the  outstanding  balance  in each  category.  Specific
reserves are determined for loans classified as special mention,  substandard or
doubtful.  Specific reserves are determined on a loan by loan basis. As the loan
portfolio  diversifies to include more commercial and  multi-family  real estate
loans,  future charge-off rates may differ from historical rates,  necessitating
revisions to the estimate.

     NONINTEREST INCOME. Noninterest income for the year ended December 31, 2005
was  $346,000,  compared to $216,000 for the year ended  December  31, 2004,  an
increase of approximately  $130,000,  or 60.2%. The increase for the most recent
period  is  due  primarily  to  increases  in  deposit-related   fees  including
non-sufficient  funds fees and overdraft fees which  management  attributes to a
larger deposit base and management's efforts to enhance this type of fee income.

     NONINTEREST  EXPENSES.  Noninterest expense for the year ended December 31,
2005 was $2.5 million  compared to $2.6 million for the year ended  December 31,
2004, a decrease of approximately $100,000, or 3.8%. The decrease in noninterest
expense  of  $100,000  or 3.8%  was due  primarily  to the  absence  of the data
processor  conversion  related  expenses  incurred during 2004.  During the year
ended  December  31,  2004,  expenses  related  to the  conversion  of the  data
processor totaled $110,800 compared to no such expenses during 2005.

     Compensation  and  benefits  expense  decreased by $26,900 or 2.5% to $1.04
million for the year ended  December 31, 2005  compared to $1.07 million for the
year ended  December 31,  2004.  The FASB No. 91  accounting

                                       26
<PAGE>

entry for the year ended  December  31,  2005  resulted  in a deferred  salaries
expense  reduction  of  $87,100.  No such  entry was made  during the year ended
December 31, 2004 as the Company  implemented this accounting  standard in 2005.
Additionally, employee education expense decreased by $30,700 or 81.2% to $7,100
as  extensive  employee  training  for the  data  processor  conversion  was not
incurred during the year ended December 31, 2005 as it was during the year ended
December  31, 2004.  Further,  retirement  fund expense  increased by $12,500 or
23.8% to $64,800 during the year ended December 31, 2005.

     Advertising  expenses  decreased  $77,500 or 45.9% to $91,300  for the year
ended  December 31, 2005  compared to $168,800  for the year ended  December 31,
2004. The reduction was due primarily to no longer having the need to market the
new main office and the activities associated with its grand opening on March 5,
2004, as well as marketing  efforts to explain our computer  conversion  and its
effects to our customers.

     Office  supplies  and  postage  expenses  decreased  $54,800,  or  31.2% to
$120,900 for the year ended  December 31, 2005 compared to $175,700 for the year
ended  December  31, 2004.  The  reduction  was due  primarily to not having the
startup expenses associated with opening the new location experienced during the
2004 period.

     Computer  and data  processing  expense  increased  by  $17,300  or 7.9% to
$235,400 for the year ended  December 31, 2005 compared to $218,000 for the year
ended December 31, 2004. The increase reflects additional  technical  assistance
during the period,  the  receipt of certain  introductory  discounts  during the
prior year and bank growth.

     Professional  fees  increased  $20,100,  or 23.4% to $105,900  for the year
ended  December  31, 2005  compared to $85,800 for the year ended  December  31,
2004.  Monthly accruals are now being used for audit and accounting  expenses to
more evenly distribute these costs throughout the year, rather than expensing as
incurred.  The Company currently intends to deregister its Common Stock with the
Securities  and Exchange  Commission  at the end of June 2006,  which it will be
permitted to do under Office of Thrift Supervision  ("OTS")  regulations.  It is
expected that professional fees will decline as the result of deregistration.

     INCOME TAX EXPENSE.  The Company provides for both the current and deferred
tax  effects  of the  transactions  reported  in its  financial  statements  and
established  deferred tax assets and liabilities  for the temporary  differences
between the financial reporting and tax bases of its assets and liabilities. The
Company establishes  valuation allowances for its net deferred tax assets unless
it is more likely than not that these net  deferred tax assets will be realized.
Based on its current earnings, its future projected earnings, and other factors,
the Company  determined in 2004 that it was appropriate to establish a valuation
allowance  of  $418,500  for its net  deferred  tax  assets.  The balance of the
valuation  allowance  at December  31, 2005 is  $566,860.  The  increases in the
valuation  allowance  for the year ended  December 31, 2005 of $148,000  relates
primarily to the net losses incurred in 2005.

MARKET/INTEREST RATE RISK DISCLOSURE

     QUALITATIVE  DISCLOSURE.  The Bank's assets and liabilities may be analyzed
by examining the extent to which its assets and  liabilities  are  interest-rate
sensitive and by monitoring the expected effects of interest rate changes on our
net portfolio value.

     An asset or liability is interest  rate  sensitive  within a specific  time
period if it will mature or reprice within that time period. If assets mature or
reprice more quickly or to a greater extent than liabilities,  the net portfolio
value and net interest  income would tend to increase  during  periods of rising
interest  rates  but  decrease   during  periods  of  falling   interest  rates.
Conversely,  if our assets  mature or reprice more slowly or to a lesser  extent
than liabilities,  the net portfolio value and net interest income would tend to
decrease  during periods of rising interest rates but increase during periods of
falling interest rates. The Bank's policy has been to mitigate the interest rate
risk inherent in the  historical  savings  institution  business of  originating
long-term  loans funded by short-term  deposits by pursuing  certain  strategies
designed to decrease the vulnerability of our earnings to material and prolonged
changes in interest rates.

         The  Bank's  primary  method  of  managing  interest  rate  risk  is to
emphasize the  origination  of ARM loans.  The Bank's ARM loans provide that the
interest  rate will  adjust  every 1, 3, 5 or 7 years.  The terms of these loans
generally  limit  the  amount  of any  single  rate  change  to a  maximum  of 2
percentage  points  and also  provide  that the  rate may not  increase  above a
"ceiling" rate  established at the time the loan is made, nor below a floor rate
which is the initial rate on the loan. At December 31, 2005,  approximately  80%
of the Bank's  mortgage loan portfolio had

                                       27
<PAGE>

adjustable rates. It also purchases, investment securities with relatively short
maturities,  normally  three years or less. At December 31, 2005,  approximately
97% of the Bank's investment portfolio had a maturity of five years or less. The
Bank  monitors  its  deposit  rates on a weekly  basis to ensure that it remains
competitive.

     QUANTITATIVE  DISCLOSURE.  The Bank measures its interest rate  sensitivity
using the OTS's measurement  system. The OTS measures an institution's  interest
rate risk by  computing  the amount by which the net present  value of cash flow
from assets,  liabilities  and off balance  sheet items (the  institution's  net
portfolio  value or  "NPV")  would  change  in the  event of a range of  assumed
changes in market interest rates. These  computations  estimate the effect on an
institution's  NPV from  instantaneous  and permanent 1% to 3% (100 to 300 basis
points) increases and decreases in market interest rates. Because of the current
level of interest  rates,  the OTS does not calculate the effect of a decline in
interest rates greater than 200 basis points.  The following  table presents the
interest rate  sensitivity of the Bank's NPV at December 31, 2005, as calculated
by the OTS, which is based upon quarterly  information that the Bank voluntarily
provided to the OTS.
<TABLE>
<CAPTION>
                                                                                      NPV AS % OF PRESENT VALUE
                                          NET PORTFOLIO VALUE                                  OF ASSETS
                           -----------------------------------------------          -------------------------------
       CHANGE                                                                                           BASIS POINT
      IN RATES              $ AMOUNT          $ CHANGE           % CHANGE           NPV RATIO             CHANGE
      --------              --------          --------           --------           ---------           -----------
                                       (DOLLARS IN THOUSANDS)
  <S>                      <C>               <C>                  <C>               <C>                  <C>
    + 300 bp                $1,845            $(3,391)              (65)%             2.70%             -  450 bp
    + 200 bp                 3,136             (2,101)              (40)%             4.48%             -  271 bp
    + 100 bp                 4,287               (949)              (18)%             6.00%             -  120 bp
        0 bp                 5,237                 --                --               7.20%                --
    - 100 bp                 5,940               (704)               13%              8.04%             +   85 bp
    - 200 bp                 6,388              1,151                22%              8.55%             +  135 bp
</TABLE>

     While we cannot  predict  future  interest  rates or their  effects  on the
Bank's NPV or net interest  income,  we do not expect current  interest rates to
have a material  adverse effect on the Bank's NPV or net interest  income in the
near future.  Computations of prospective effects of hypothetical  interest rate
changes are based on numerous  assumptions,  including relative levels of market
interest rates,  prepayments and deposit runoff and should not be relied upon as
indicative  of  actual  results.  Certain  shortcomings  are  inherent  in  such
computations.  Although certain assets and liabilities may have similar maturity
or periods of  repricing,  they may react at  different  times and in  different
degrees to changes in the market interest  rates.  The interest rates on certain
types of assets and  liabilities  may  fluctuate in advance of changes in market
interest  rates,  while rates on other types of assets and  liabilities  may lag
behind changes in market  interest  rates.  Certain  assets,  such as ARM loans,
generally have features which restrict changes in interest rates on a short-term
basis and over the life of the loan. In the event of a change in interest rates,
prepayments and early withdrawal levels could deviate  significantly  from those
assumed in making  calculations  set forth above.  Although the Bank underwrites
its  adjustable-rate  borrowers on the basis of the maximum  rate allowed  under
their loan  agreements,  an  increased  credit risk may result as the ability of
many  borrowers  to service  their debt may decrease in the event of an interest
rate increase.

     The Board of Directors reviews the Bank's asset and liability policies. The
Board of Directors meets  regularly to review interest rate risk and trends,  as
well as liquidity and capital ratios and  requirements.  Management  administers
the policies and  determinations  of the Board of Directors  with respect to the
Bank's asset and liability goals and strategies. We expect that the Bank's asset
and  liability  policies and  strategies  will  continue as described so long as
competitive and regulatory  conditions in the financial institution industry and
market interest rates continue as they have in recent years.

LIQUIDITY AND CAPITAL RESOURCES

     The Company currently has no operating business other than that of the Bank
and does not have material  funding needs other than  servicing its  outstanding
debt.  In the  future,  the  Company may  require  funds for  dividends  and tax
payments for which it will rely on dividends  and other  distributions  from the
Bank. The Bank is subject to various  regulatory  restrictions on the payment of
dividends.

                                       28
<PAGE>

     The Bank's  primary  sources of funds are deposits,  repayment of loans and
mortgage-backed  securities,  maturities  of  investments  and  interest-bearing
deposits and funds  provided  from  operations.  The Bank is also able to obtain
advances from the FHLB of Cincinnati,  although  historically  the Bank has done
this rarely. While scheduled repayments of loans and mortgage-backed  securities
and maturities of investment  securities are relatively  predictable  sources of
funds,  deposit flows and loan prepayments are greatly influenced by the general
level of interest rates, economic conditions and competition.  The Bank uses its
liquidity resources principally to fund existing and future loan commitments, to
fund maturing time  certificates  and demand deposit  withdrawals,  to invest in
other  interest-earning  assets,  to maintain  liquidity,  and to meet operating
expenses.

     Liquidity may be adversely affected by unexpected deposit outflows,  higher
interest rates paid by competitors,  adverse  publicity  relating to the savings
and loan industry, and similar matters.  Management monitors projected liquidity
needs and determines the level  desirable,  based in part on our  commitments to
make loans and management's assessment of our ability to generate funds.

     A major  portion of our  liquidity  consists of cash and cash  equivalents,
which include cash and  interest-bearing  deposits in other banks.  The level of
these assets is dependent upon our operating,  investing,  lending and financing
activities  during  any  given  period.  At  December  31,  2005,  cash and cash
equivalents totaled $2.0 million.

     The Bank's primary investing  activities  include  origination of loans and
purchases of investment and mortgage-backed  securities.  During the years ended
December  31,  2005  and  2004,  purchases  of  investment  and  mortgage-backed
securities  totaled zero and  $250,000,  respectively,  while loan  originations
totaled $27.0 million and $28.3 million,  respectively.  These  investments were
funded in part by proceeds  from  repayments of loans,  maturities  and calls of
investment  and  mortgage-backed  securities and an increase in deposits for the
years ended December 31, 2005 and 2004.

     At December  31,  2005,  we had  $765,900  in  outstanding  commitments  to
originate  loans.  We  anticipate  that  the Bank  will  have  sufficient  funds
available to meet its current loan origination  commitments.  Time  certificates
which are  scheduled  to mature in one year or less  totaled  $24.1  million  at
December 31, 2005. Based on historical  experience,  management  believes that a
significant  portion of such deposits will remain with the Bank,  although there
can be no  assurance  that it will do so.  In the  event  the Bank is  unable to
retain  these  deposits,  it may seek  replacement  funding  through the FHLB of
Cincinnati or other sources.

     The Bank relies primarily on local deposits for its funding needs. In order
to finance loan growth, the Bank may also borrow from the FHLB of Cincinnati. At
December 31, 2005, the Bank had $3.0 million in unused borrowing capacity at the
FHLB of Cincinnati.

     The Bank is subject to minimum capital  requirements under OTS regulations.
Under these  regulations,  the Bank must maintain a Tier 1 or Core Capital ratio
of 5.0%, a Tier 1 Risk-Based Ratio of 6.0% and a total risk-based ratio of 10.0%
to be "well  capitalized."  At December 31, 2005, the Bank's Tier 1/Core Capital
ratio was 5.47%,  its Tier 1  risk-based  capital  ratio was 9.30% and its total
risk-based capital ratio was 10.22%.  Although these ratios exceeded  regulatory
requirements to be well capitalized, the Bank did not have sufficient capital to
grow, particularly if it continued to experience losses.

     The Company has previously  borrowed $1.25 million on a line of credit from
The Banker's Bank to provide  additional  liquidity at the holding company level
and for capital  contributions  for the Bank. The line of credit provides for an
interest rate at the prime rate plus 0.25% and is secured by the Company's stock
in the Bank. In December 2005 the line of credit's principal balance was reduced
by $400,000 by using the proceeds  from an  unsecured  loan from four members of
the Company's Board of Directors.  The four directors loaned these funds for the
sole  purpose of paying down the  outstanding  line of credit with The  Banker's
Bank. This loan pays the four Directors a fixed interest rate of 7.50%.


                                       29
<PAGE>

NEW ACCOUNTING PRONOUNCEMENTS

     In December of 2003, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") No. 03-3,  "Accounting for Certain Loans or
Debt Securities  Acquired in a Transfer." SOP No. 03-3 addresses  accounting for
differences  between  contractual  cash  flows  and cash  flows  expected  to be
collected  from an investor's  initial  investment  in loans or debt  securities
acquired in a transfer if those differences are attributable,  at least in part,
to credit  quality.  This SOP  prohibits  "carry  over" or creation of valuation
allowances in the initial  accounting of all loans acquired in transfers  within
the scope of SOP No. 03-3, which includes loans acquired in a purchase  business
combination.  SOP No.  03-3 is  effective  for loans  acquired  in fiscal  years
beginning after December 15, 2004.

     At its March  2004  meetings,  the  Emerging  Issues  Task  Force  ("EITF")
revisited EITF Issue No. 03-1, "The Meaning of  Other-than-Temporary  Impairment
and its  Application  to Certain  Investments"  (EITF No. 03-1).  Effective with
reporting  periods  beginning after June 15, 2004,  companies  carrying  certain
types of debt and equity  securities  whose  amortized  cost is higher  than the
securities'  fair  values  will have to use more  detailed  criteria to evaluate
whether to record a loss and will have to disclose additional  information about
unrealized  losses.   The  additional   disclosure  has  been  included  in  the
accompanying  financial  statements but the  application of the new  measurement
provisions  was delayed by the EITF on  September  30, 2004 to give the FASB and
EITF more time to study this issue.

     On December  16,  2004,  the FASB issued SFAS 123  (revised),  "Share-Based
Payment" ("SFAS 123 (R)"). This standard requires expensing of stock options and
other share-based payments beginning in 2005, and supersedes FASB's earlier rule
(the original SFAS 123) that had allowed  companies to choose between  expensing
stock options or showing pro forma disclosure only.  Public entities (other than
those  filing as small  business  issuers)  will be required to apply  Statement
123(R) as of the first interim or annual reporting period that begins after June
15, 2005.  Public entities that file as small business  issuers will be required
to apply Statement  123(R) in the first interim or annual  reporting period that
begins after December 15, 2005.  The Company is currently  evaluating the effect
of the adoption of this statement.

     These recently  issued  pronouncements  are not expected to have a material
impact on the Bank as the GAAP  requirements  either are not  applicable  to the
Bank or the impact is insignificant.

IMPACT OF INFLATION AND CHANGING PRICES

     The  Bank's  financial  statements  and the  accompanying  notes  presented
elsewhere in this  document,  have been prepared in accordance  with  accounting
principles generally accepted in the United States of America, which require the
measurement of financial  position and operating  results in terms of historical
dollars without considering the change in the relative purchasing power of money
over time and due to  inflation.  The impact of  inflation  is  reflected in the
increased  cost of our  operations.  As a result,  interest rates have a greater
impact on our  performance  than do the effects of general  levels of inflation.
Interest  rates do not  necessarily  move in the same  direction  or to the same
extent as the prices of goods and services.

ITEM 7. FINANCIAL STATEMENTS
----------------------------

     The Company's  financial  statements are contained in this Annual Report on
Form 10-KSB immediately following Item 14.

ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
--------------------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------

     On November 14,  2005,  the  Registrant's  independent  auditors,  BKD, LLP
("BKD"),  informed the Registrant of its decision to resign as the  Registrant's
independent  auditors effective with the conclusion of its procedures related to
the Form 10-QSB for the quarter ended September 30, 2005. The decision to change
accountants was not recommended by the audit committee of the Registrant's Board
of  Directors.   BKD's  reports  on  the  Registrant's   consolidated  financial
statements  for the two fiscal years ended  December 31, 2004 did not contain an
adverse opinion or disclaimer of opinion,  and were not qualified or modified as
to uncertainty,  audit scope or accounting principles.  In connection with their
audits of the two  fiscal  years  ended  December  31,  2004 and any  subsequent
interim period preceding the date hereof,  there were no  disagreements  between
the  Registrant  and BKD on any matters of  accounting  principles or practices,
financial statement  disclosure,  or auditing scope or procedure,  which, if not
resolved to the

                                       30
<PAGE>

satisfaction  of BKD,  would have caused them to make a reference to the subject
matter of the disagreements in connection with their reports.

ITEM 8A. CONTROLS AND PROCEDURES.
---------------------------------

     The Company's management evaluated, with the participation of the Company's
Chief Executive  Officer and Chief Financial  Officer,  the effectiveness of the
Company's  disclosure  controls  and  procedures,  as of the  end of the  period
covered by this report.  Based on that evaluation,  the Chief Executive  Officer
and Chief Financial  Officer  concluded that,  except for the items noted below,
the Company's  disclosure  controls and  procedures are effective to ensure that
information required to be disclosed by the Company in the reports that it files
or submits  under the  Securities  Exchange Act of 1934 is recorded,  processed,
summarized and reported within the time periods  specified in the Securities and
Exchange  Commission's  rules and forms.  There were no changes in the Company's
internal  control over financial  reporting  that occurred  during the Company's
last fiscal quarter that have materially  affected,  or are reasonably likely to
materially affect, the Company's internal control over financial reporting.

     In  connection  with their audit of our financial  statements  for the year
ended December 31, 2005, our independent registered public accounting firm, King
+ Company,  PSC,  identified a material  weakness,  as defined in Public Company
Accounting  Oversight  Board  Standard  No.  2,  in our  internal  control  over
financial reporting.  Specifically, King + Company PSC noted a failure to timely
perform various account reconciliations.  Management believes that this weakness
is primarily  attributable to human resource  limitations  within our accounting
and financial reporting function and has instituted a schedule for accomplishing
this task.

ITEM 8B. OTHER INFORMATION
--------------------------

     Not applicable.

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
--------------------------------------------------------------------------------
WITH SECTION 16(a) OF THE EXCHANGE ACT
--------------------------------------

     The  information  contained  under the sections  captioned  "Section  16(a)
Beneficial  Ownership  Reporting  Compliance"  and  "Proposal  I --  Election of
Directors"  in the  Company's  definitive  Proxy  Statement  for the 2006 Annual
Meeting of Stockholders are incorporated herein by reference.

     The  Company has  adopted a Code of Ethics  that  applies to its  principal
executive officer,  principal financial officer, principal accounting officer or
controller or persons performing similar functions. A copy of the Company's Code
of Ethics will be provided to any person without charge upon written  request to
Michael D. Wortham, Chief Financial Officer, Community First Bancorp, Inc., 2420
North Main Street, Madisonville, Kentucky 42431.

ITEM 10. EXECUTIVE COMPENSATION
-------------------------------

         The information  contained under the section  captioned  "Proposal I --
Election of  Directors  -  Executive  Compensation"  in the Proxy  Statement  is
incorporated herein by reference.

ITEM 11.  SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND  MANAGEMENT AND
--------------------------------------------------------------------------------
RELATED STOCKHOLDER MATTERS
---------------------------

     (a)  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

          Information  required by this item is incorporated herein by reference
          to the Section captioned "Principal Holders" of the Proxy Statement.

                                       31
<PAGE>


     (b)  SECURITY OWNERSHIP OF MANAGEMENT

          Information  required by this item is incorporated herein by reference
          to the section captioned  "Proposal I -- Election of Directors" of the
          Proxy Statement.

     (c)  CHANGES IN CONTROL

          Management  of the Company  knows of no  arrangements,  including  any
          pledge by any person of  securities  of the Company,  the operation of
          which may at a  subsequent  date  result in a change in control of the
          registrant.

     (d)  SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

          The information required by this item is set forth below.
<TABLE>
<CAPTION>
                                           EQUITY COMPENSATION PLAN INFORMATION
                                                   (a)                  (b)                     (c)
                                                                                          NUMBER OF SECURITIES
                                          NUMBER OF SECURITIES      WEIGHTED-AVERAGE     REMAINING AVAILABLE FOR
                                            TO BE ISSUED UPON      EXERCISE PRICE OF      FUTURE ISSUANCE UNDER
                                               EXERCISE OF            OUTSTANDING       EQUITY COMPENSATION PLANS
                                          OUTSTANDING OPTIONS,     OPTIONS, WARRANTS      (EXCLUDING SECURITIES
                                           WARRANTS AND RIGHTS         AND RIGHTS        REFLECTED IN COLUMN (a))
                                           -------------------         ----------        ------------------------
<S>                                             <C>                   <C>                          <C>
    Equity compensation plans
      approved by security holders:
        2004 Stock Option Plan . . . . .             --               $     --                     27,772
        2005 Restricted Stock Plan . . .          5,197                     --                      3,134
    Equity compensation plans
      not approved by security
      holders  . . . . . . . . . . . . .             --                     --                         --
                                                  -----               --------                     ------

         TOTAL                                    5,197               $     --                     30,906
                                                  =====               ========                     ======
</TABLE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------------------------------------------------------

     The information  required by this item is incorporated  herein by reference
to the  section  captioned  "Proposal  I --  Election  of  Directors  -- Certain
Relationships and Related Transactions" in the Proxy Statement.

ITEM 13. EXHIBITS
-----------------

     The  following  exhibits are either filed as part of this Annual  Report on
Form 10-KSB or incorporated herein by reference:
<TABLE>
<CAPTION>
         NO.      DESCRIPTION
         ---      -----------
        <S>       <C>
         3.1      Articles of Incorporation*
         3.2      Bylaws*
         4        Form of Common Stock Certificate*
         10.1     Employment Agreement between Community First Bank and William M. Tandy + **
         10.2     2004 Stock Option Plan  + ***
         10.3     Community First Bank 2005 Restricted Stock Plan  + ****
         16.1     Letter on Change in Certifying Accountant*****
         21       Subsidiaries of the Registrant
         23.1     Consent of King + Company, PSC
         23.2     Consent of BKD, LLP

                                       32
<PAGE>

         31.1     Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
         31.2     Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
         32       Section 1350 Certification
<FN>
----------------------
+    Management  contract or  compensatory  plan or  arrangement  required to be
     filed as an exhibit.
*    Incorporated by reference from the Registrant's  Registration  Statement on
     Form SB-2 (File No.  333-104226)  originally  filed with the Securities and
     Exchange Commission on April 1, 2003.
**   Incorporated by reference from Registrant's  Pre-Effective  Amendment No. 1
     to Registration Statement on Form SB-2 (File No. 333-104226) filed with the
     Securities and Exchange Commission on May 5, 2003.
***  Incorporated by reference from Registrant's  Registration Statement on Form
     S-8 (File No. 333-116450) filed with the Securities and Exchange Commission
     on June 14, 2004.
**** Incorporated by reference from Registrant's  Registration Statement on Form
     S-8 (File No. 333-125769) filed with the Securities and Exchange Commission
     on June 13, 2005.
***** Incorporated by reference from the Registrant's  Form 8-K/A filed December
      9, 2005.
</FN>
</TABLE>


ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
-----------------------------------------------

     The information set forth under the caption  "Independent  Auditors" in the
Proxy Statement is incorporated herein by reference.


                                       33

<PAGE>

                          COMMUNITY FIRST BANCORP, INC.

                                    INDEX TO
                        CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004

                                                                         PAGE
Reports of Independent Registered Public Accounting Firm.................F-1
Consolidated Financial Statements
      Balance Sheets.....................................................F-3
      Statements of Operations...........................................F-4
      Statements of Stockholders' Equity.................................F-5
      Statements of Cash Flows...........................................F-6
      Notes to Financial Statements......................................F-7

                                       34
<PAGE>
                        REPORT OF INDEPENDENT REGISTERED
                        --------------------------------
                             PUBLIC ACCOUNTING FIRM
                             ----------------------



Audit Committee, Board of Directors and Stockholders
Community First Bancorp, Inc.
Madisonville, Kentucky


We have audited the  accompanying  consolidated  balance  sheet of the Community
First  Bancorp,  Inc.  as of December  31,  2005,  and the related  consolidated
statements of operations, changes in stockholders' equity and cash flows for the
year then  ended.  These  financial  statements  are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audit.

We conducted  our audit in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements  are free of material  misstatement.  The Company is not  required to
have,  nor were we engaged to perform,  an audit of its  internal  control  over
financial reporting.  Our audit included  consideration of internal control over
financial  reporting  as  a  basis  for  designing  audit  procedures  that  are
appropriate  in the  circumstances,  but not for the  purpose of  expressing  an
opinion on the  effectiveness  of the Company's  internal control over financial
reporting.  Accordingly,  we express  no such  opinion.  An audit also  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial   statements,   assessing  the  accounting  principles  used  and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

In our opinion,  the 2005 consolidated  financial  statements  referred to above
present  fairly,  in  all  material  respects,  the  financial  position  of the
Community  First  Bancorp,  Inc. as of December  31, 2005 and the results of its
operations  and its cash  flows  for the year  then  ended  in  conformity  with
accounting principles generally accepted in the United States of America.

                                                   King + Company, PSC


                                                   /s/ King + Company, PSC

Louisville, Kentucky
February 23, 2006

                                                                             F-1
<PAGE>

             Report of Independent Registered Public Accounting Firm


Audit Committee, Board of Directors
   and Stockholders
Community First Bancorp, Inc.
Madisonville, Kentucky


We have audited the accompanying  consolidated  balance sheet of Community First
Bancorp,  Inc.  (Company) as of December 31, 2004, and the related  consolidated
statement of operations,  stockholders'  equity and cash flows for the year then
ended.  These  financial  statements  are the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audit.

We conducted  our audit in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial  position of the Company as of
December 31, 2004,  and the results of its operations and its cash flows for the
year then ended in conformity with accounting  principles  generally accepted in
the United States of America.

                                                /s/ BKD, LLP



Louisville, Kentucky
February 25, 2005

                                                                             F-2
<PAGE>

                          COMMUNITY FIRST BANCORP, INC.
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2005 AND 2004
<TABLE>
<CAPTION>

                                                                               2005            2004
                                                                           ----------------------------
<S>                                                                        <C>             <C>
ASSETS
        Cash and due from banks                                            $    785,814    $    614,155
        Interest-bearing demand deposits                                      1,223,134       2,179,041
        Interest-bearing time deposits                                               --       3,000,000
                                                                           ------------    ------------

               Cash and cash equivalents                                      2,008,948       5,793,196

        Held-to-maturity securities                                              65,522          88,965
        Available-for-sale securities                                         1,703,147       2,215,285

        Loans receivable, net of the allowance for loan loss of $387,822
          and $319,937, for December 31, 2005 and 2004, respectively         64,578,288      51,931,555
        Premises and equipment, net                                           2,286,004       2,495,324
        Federal Home Loan Bank (FHLB) stock                                     721,900         687,000
        Interest receivable                                                     288,501         227,066
        Deferred income taxes                                                    16,587          14,521
        Other assets                                                             59,817          50,467
                                                                           ------------    ------------

               Total assets                                                $ 71,728,714    $ 63,503,379
                                                                           ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY

    LIABILITIES
        Deposits                                                           $ 54,476,673    $ 46,466,036
        FHLB advances                                                        13,000,000      13,000,000
        Advances under line of credit                                           850,000         750,000
        Loans from directors                                                    400,000              --
        Interest payable                                                        158,391          56,231
        Other liabilities                                                       123,649          67,617
                                                                           ------------    ------------

               Total liabilities                                             69,008,713      60,339,884
                                                                           ------------    ------------

    STOCKHOLDERS' EQUITY
        Preferred stock, $.01 par value, authorized 1,000,000 shares                 --              --
        Common stock, $.01 par value; authorized 5,000,000 shares
          authorized; 277,725 shares, issued and outstanding                      2,777           2,777
        Additional paid-in capital                                            2,457,428       2,457,428
        Retained earnings - substantially restricted                            291,993         731,477
        Accumulated other comprehensive loss                                    (32,197)        (28,187)
                                                                           ------------    ------------

               Total stockholders' equity                                     2,720,001       3,163,495
                                                                           ------------    ------------

               Total liabilities and stockholders' equity                  $ 71,728,714    $ 63,503,379
                                                                           ============    ============
</TABLE>

See Notes to Consolidated Financial Statements
                                                                             F-3
<PAGE>

                          COMMUNITY FIRST BANCORP, INC.
                      CONSOLIDATED STATEMENT OF OPERATIONS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004
<TABLE>
<CAPTION>
                                                                                     2005                2004
                                                                                 --------------------------------
<S>                                                                              <C>                 <C>
    INTEREST AND DIVIDEND INCOME
        Loans                                                                    $  3,439,471        $  2,574,729
        Investment securities and deposits                                             80,730              89,988
        Dividends on FHLB stock                                                        35,718              26,931
                                                                                  -----------         -----------

               Total interest and dividend income                                   3,555,919           2,691,648
                                                                                  -----------         -----------

    INTEREST EXPENSE
        Deposits                                                                    1,340,870             950,342
        FHLB advances                                                                 387,922             126,856
        Other borrowings                                                               54,581               1,751
                                                                                  -----------         -----------

               Total interest expense                                               1,783,373           1,078,949
                                                                                  -----------         -----------

    NET INTEREST INCOME                                                             1,772,546           1,612,699

    PROVISION FOR LOAN LOSSES                                                          78,500             163,500
                                                                                  -----------         -----------

    NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                             1,694,046           1,449,199
                                                                                  -----------         -----------

    NONINTEREST INCOME
        Service charges and fees                                                      326,462             215,602
        Loss on sale of fixed assets                                                       --             (12,702)
        Loss on sale of other real estate                                              (2,000)               (449)
        Foreclosed real estate expense, net                                            (4,356)             (4,739)
        Insurance commissions and premiums                                              5,189               3,484
        Other income                                                                   20,850              14,601
                                                                                  -----------         -----------

               Total noninterest income                                               346,145             215,797
                                                                                  -----------         -----------

    NONINTEREST EXPENSE
        Compensation and benefits                                                   1,043,406           1,070,113
        Directors fees                                                                 43,200              43,200
        Occupancy expense                                                             335,013             316,300
        Insurance premiums                                                             31,352              38,975
        Data processing                                                               235,385             218,077
        Advertising                                                                    91,332             168,813
        Office supplies, telephone and postage                                        120,885             175,702
        Payroll and other taxes                                                       148,459             111,875
        Professional fees                                                             105,864              85,791
        Data processor conversion expenses                                                 --             102,595
        Other operating expenses                                                      324,779             249,543
                                                                                  -----------         -----------

               Total noninterest expense                                            2,479,675           2,580,984
                                                                                  -----------         -----------

    LOSS BEFORE INCOME TAX                                                           (439,484)           (915,988)

    PROVISION (CREDIT) FOR INCOME TAXES                                                     --            115,580
                                                                                  ------------         ----------

    NET LOSS                                                                     $   (439,484)       $ (1,031,568)
                                                                                  ===========         ===========

    BASIC LOSS PER SHARE                                                         $      (1.58)       $     (3.71)

    DILUTED LOSS PER SHARE                                                       $      (1.58)       $     (3.71)
</TABLE>


See Notes to Consolidated Financial Statements
                                                                             F-4

<PAGE>

                          COMMUNITY FIRST BANCORP, INC.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                     YEARS ENDED DECEMBER 31, 2005 AND 2004
<TABLE>
<CAPTION>
                                                                                          ACCUMULATED
                                                COMMON STOCK     ADDITIONAL                 OTHER
                                             ----------------     PAID-IN       RETAINED  COMPREHENSIVE  COMPREHENSIVE
                                             SHARES    AMOUNT     CAPITAL      EARNINGS   INCOME (LOSS)  INCOME (LOSS)     TOTAL
                                             -----------------------------------------------------------------------------------

<S>                                          <C>      <C>       <C>            <C>           <C>          <C>           <C>
BALANCE, JANUARY 1, 2004                     277,725  $ 2,777   $2,466,428     $ 1,763,045   $ (23,483)                $4,208,767

  Comprehensive income (loss)
      Net loss                                    --       --           --      (1,031,568)         --   $(1,031,568)  (1,031,568)
      Change in unrealized depreciation
        on available-for-sale securities,
        net of taxes                              --       --           --              --      (4,704)       (4,704)      (4,704)
                                                                                                          ----------

          Total comprehensive loss                                                                        (1,036,272)

Cost related to issuance of stock                 --       --       (9,000)             --         --                      (9,000)
                                            --------   ------    ---------     -----------   --------                  ----------

BALANCE, DECEMBER 31, 2004                   277,725    2,777    2,457,428         731,477    (28,187)                  3,163,495

  Comprehensive income (loss)
      Net loss                                    --       --           --        (439,484)                 (439,484)    (439,484)
      Change in unrealized depreciation
        on available-for-sale securities,
        net of taxes                              --       --           --              --     (4,010)        (4,010)      (4,010)
                                                                                                          -----------

          Total comprehensive loss                                                                       $  (443,494)
                                                                                                          ==========

                                             -------   ------    ---------      ----------    -------                   ---------
BALANCE, DECEMBER 31, 2005                   277,725  $ 2,777   $2,457,428     $   291,993   $(32,197)                 $2,720,001
                                             =======   ======    =========      ==========    =======                   =========
</TABLE>

See Notes to Consolidated Financial Statements                             F-5

<PAGE>



                          COMMUNITY FIRST BANCORP, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004
<TABLE>
<CAPTION>
                                                                                   2005                2004
                                                                            ----------------------------------------
<S>                                                                            <C>                 <C>
    OPERATING ACTIVITIES
        Net loss                                                               $     (439,484)     $  (1,031,568)
        Items not requiring (providing) cash
           Provision for loan losses                                                   78,500            163,500
           Depreciation, amortization and accretion                                   216,032            191,776
           Deferred compensation for restricted stock plan                              7,470                 --
           Loss on disposal of equipment                                                   --             12,702
           Loss on sale of other real estate owned                                      2,000                449
           Deferred income taxes                                                           --            115,580
           FHLB stock dividends                                                       (34,900)           (27,400)
        Changes in
           Interest receivable                                                        (61,435)           (67,916)
           Other assets                                                               (34,350)             2,436
           Interest payable and other liabilities                                     383,901            (37,323)
                                                                                -------------       ------------

               Net cash provided by (used in) operating activities                    117,734           (677,764)
                                                                                -------------       ------------

    INVESTING ACTIVITIES
        Net change in loans                                                       (12,725,233)       (17,028,913)
        Purchases of available-for-sale securities                                         --           (252,570)
        Proceeds from maturities of available-for-sale securities                     500,000                 --
        Proceeds from maturities of held-to-maturity securities                        23,443          1,335,102
        Purchase of premises and equipment                                               (650)          (741,378)
        Proceeds from sale of foreclosed assets                                        23,000             14,147
                                                                                -------------       ------------

               Net cash used in investing activities                              (12,179,440)       (16,673,612)
                                                                                --------------      ------------

    FINANCING ACTIVITIES
        Net increase in deposits                                                    7,777,458         13,294,510
        Repayment of FHLB advances                                                (15,000,000)        (4,500,000)
        Proceeds from FHLB advances                                                15,000,000         12,500,000
        Proceeds from line of credit and notes payable                                900,000            750,000
        Repayment of line of credit and notes payable                                (400,000)                --
        Costs of issuance of stock                                                         --             (9,000)
                                                                                -------------       ------------

               Net cash provided by financing activities                            8,277,458         22,035,510
                                                                                -------------       ------------

    INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS                               (3,784,248)         4,684,134

    CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                    5,793,196          1,109,062
                                                                                -------------       ------------

    CASH AND CASH EQUIVALENTS, END OF YEAR                                     $    2,008,948      $   5,793,196
                                                                                =============       ============

    SUPPLEMENTAL CASH FLOWS INFORMATION

        Interest paid                                                          $    1,672,758      $   1,034,411
        Loans transferred to foreclosed real estate                            $       29,879      $      42,596
        Loans to facilitate sale of foreclosed real estate                     $       30,000      $      28,000
</TABLE>

See Notes to Consolidated Financial Statements                               F-6

<PAGE>
                          COMMUNITY FIRST BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004


NOTE 1:  NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     NATURE OF OPERATIONS

          Community  First Bancorp,  Inc.  (Company) is a thrift holding company
          whose principal activity is the ownership and management of its wholly
          owned subsidiary,  Community First Bank (Bank).  The Bank is primarily
          engaged in providing a full range of banking and financial services to
          individual  and  corporate   customers,   primarily  in  Madisonville,
          Kentucky and the surrounding  area. The Bank is subject to competition
          from  other  financial  institutions.  The  Bank  is  subject  to  the
          regulation  of  certain  federal  and  state  agencies  and  undergoes
          periodic examinations by those regulatory authorities.


     PRINCIPLES OF CONSOLIDATION

          The  consolidated  financial  statements  include the  accounts of the
          Company  and the  Bank.  All  significant  intercompany  accounts  and
          transactions have been eliminated in consolidation.


     USE OF ESTIMATES

          The  preparation  of  the  financial  statements  in  conformity  with
          accounting  principles  generally  accepted  in the  United  States of
          America,  requires  management to make estimates and assumptions  that
          affect the reported  amounts of assets and  liabilities and disclosure
          of  contingent  assets and  liabilities  at the date of the  financial
          statements  and the reported  amounts of revenues and expenses  during
          the  reporting   period.   Actual  results  could  differ  from  those
          estimates.

          Material  estimates that are  particularly  susceptible to significant
          change  relate to the  determination  of the  allowance  for losses on
          loans,   valuation  allowance  related  to  deferred  taxes,  and  the
          valuation of real estate acquired in connection  with  foreclosures or
          in satisfaction of loans. In connection with the  determination of the
          allowances for losses on loans and foreclosed real estate,  management
          obtains independent appraisals for significant properties.

     CASH AND CASH EQUIVALENTS

          The Company considers all liquid investments with original  maturities
          of three months or less to be cash equivalents.


     INVESTMENT SECURITIES

          Available-for-sale  securities,  which  include any security for which
          the Bank has no  immediate  plan to sell but  which may be sold in the
          future,  are  carried at fair value.  Unrealized  gains and losses are
          recorded,  net of related income tax effects,  in other  comprehensive
          income.

                                                                             F-7

<PAGE>
                          COMMUNITY FIRST BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004

          Held-to-maturity  securities, which include any security for which the
          Bank has the positive intent and ability to hold until  maturity,  are
          carried at historical  cost adjusted for  amortization of premiums and
          accretion of discounts.

          Amortization  of premiums and  accretion of discounts  are recorded as
          interest  income  from  securities.  Realized  gains  and  losses  are
          recorded as net security gains (losses).  Gains and losses on sales of
          securities are determined on the specific-identification method.

     LOANS

          Loans  that  management  has the  intent  and  ability to hold for the
          foreseeable  future or until maturity or payoffs are reported at their
          outstanding  principal  balances  adjusted for any charge-offs and the
          allowance for loan losses. Interest income is reported on the interest
          method.  Generally,  loans are placed on nonaccrual  status at 90 days
          past due and interest is  considered  a loss,  unless the loan is well
          secured and in the process of collection.


     ALLOWANCE FOR LOAN LOSSES

          The allowance for loan losses is  established  as losses are estimated
          to have  occurred  through a  provision  for loan  losses  charged  to
          income.  Loan losses are charged against the allowance when management
          believes  the   uncollectibility  of  a  loan  balance  is  confirmed.
          Subsequent recoveries, if any, are credited to the allowance.

          The  allowance  for loan  losses is  evaluated  on a regular  basis by
          management  and is based  upon  management's  periodic  review  of the
          collectibility  of the loans in light of  historical  experience,  the
          nature and volume of the loan portfolio,  adverse  situations that may
          affect  the  borrower's  ability  to  repay,  estimated  value  of any
          underlying   collateral  and  prevailing  economic  conditions.   This
          evaluation is inherently subjective, as it requires estimates that are
          susceptible  to  significant  revision  as  more  information  becomes
          available.

          A loan is considered  impaired when, based on current  information and
          events,  it is  probable  that the Bank will be unable to collect  the
          scheduled  payments of principal or interest when due according to the
          contractual  terms  of  the  loan  agreement.  Factors  considered  by
          management  in  determining   impairment   include   payment   status,
          collateral value and the probability of collecting scheduled principal
          and interest  payments when due. Loans that  experience  insignificant
          payment delays and payment shortfalls  generally are not classified as
          impaired. Management determines the significance of payment delays and
          payment shortfalls on a case-by-case  basis, taking into consideration
          all of the  circumstances  surrounding  the  loan  and  the  borrower,
          including  the length of the delay,  the  reasons  for the delay,  the
          borrower's  prior  payment  record and the amount of the  shortfall in
          relation to the principal and interest owed. Impairment is measured on
          a loan-by-loan  basis for commercial and construction  loans by either
          the present  value of expected  future  cash flows  discounted  at the
          loan's effective  interest rate, the loan's obtainable market price or
          the fair value of the collateral if the loan is collateral dependent.


                                                                             F-8
<PAGE>
                          COMMUNITY FIRST BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004

          Large  groups of smaller  balance  homogenous  loans are  collectively
          evaluated for  impairment.  Accordingly,  the Bank does not separately
          identify  individual  consumer and  residential  loans for  impairment
          measurements.


     PREMISES AND EQUIPMENT

          Depreciable assets are stated at cost, less accumulated  depreciation.
          Depreciation is charged to expense  primarily using the  straight-line
          method  over the  estimated  useful  lives of the  related  assets  as
          follows:

           Buildings                                           39 - 50 years
           Building improvements                                7 - 40 years
           Furniture and equipment                              3 - 15 years

     FEDERAL HOME LOAN BANK STOCK

          Federal  Home Loan Bank  (FHLB)  stock is a  required  investment  for
          institutions  that  are  members  of the  FHLB  system.  The  required
          investment in the common stock is based on a predetermined formula.


     FORECLOSED REAL ESTATE

          Assets acquired through,  or in lieu of, loan foreclosure are held for
          sale  and  are  initially  recorded  at  fair  value  at the  date  of
          foreclosure, establishing a new cost basis. Subsequent to foreclosure,
          management periodically performs valuations and the assets are carried
          at the  lower of  carrying  amount  or fair  value  less cost to sell.
          Revenue and  expenses  from  operations  and changes in the  valuation
          allowance  are  included  in net  income or  expense  from  foreclosed
          assets.


     INCOME TAXES

          Deferred tax assets and liabilities are recognized for the tax effects
          of differences between the financial statement and tax basis of assets
          and  liabilities.  A  valuation  allowance  is  established  to reduce
          deferred  tax assets if it is more likely than not that a deferred tax
          asset will not be realized.  The Company files consolidated income tax
          returns with its subsidiary.


     STOCK OPTIONS

          The Company has a stock-based  employee  compensation  plan,  which is
          described  more fully in Note 8. The  Company  accounts  for this plan
          under the recognition  and  measurement  principles of APB Opinion No.
          25,   Accounting   for  Stock   Issued  to   Employees,   and  related
          Interpretations.   No  stock-based   employee   compensation  cost  is
          reflected in net income, as all options granted under this plan had an
          exercise  price  equal to the market  value of the  underlying  common
          stock on the grant date. The following table illustrates the effect on
          net income and  earnings per share if the Company had applied the fair
          value provisions of FASB Statement No. 123, Accounting for Stock-Based
          Compensation, to stock-based employee compensation.

                                                                             F-9
<PAGE>
                          COMMUNITY FIRST BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004
<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31,
                                                               2005            2004
                                                          ----------------------------
<S>                                                       <C>            <C>
Net loss, as reported                                     $  (439,484)   $  (1,031,568)
Less total stock-based employee compensation cost
   determined under the fair value based method, net
   of income taxes                                                  0            7,558
                                                          -----------    -------------

Pro forma net loss                                        $  (439,484)   $  (1,039,126)

Loss per share:
    Basic - as reported                                   $     (1.58)   $       (3.71)
                                                          ===========    =============
    Basic - pro forma                                     $     (1.58)   $       (3.74)
                                                          ===========    =============
    Diluted - as reported                                 $     (1.58)   $       (3.71)
                                                          ===========    =============
    Diluted - pro forma                                   $     (1.58)   $       (3.74)
                                                          ===========    =============
</TABLE>

     ADVERTISING COSTS

          Advertising costs are expensed as incurred.

     EARNINGS PER SHARE

          Earnings per share have been computed based upon the  weighted-average
          common  shares  outstanding  during 2005 and 2004.  Since there are no
          dilutive securities, basic and diluted earnings per share is the same.


     RECLASSIFICATIONS

          Certain  reclassifications  have  been  made  to  the  2004  financial
          statements to conform to the 2005  financial  statement  presentation.
          These reclassifications had no effect on net income.


NOTE 2:  CONVERSION TO STOCK OWNERSHIP

          On June 26, 2003, the Bank consummated its conversion from a federally
          charted  mutual  savings bank to a federally  chartered  stock savings
          bank pursuant to the Bank's plan of  conversion.  Concurrent  with the
          formation of the Company,  the Company  acquired  100% of the stock of
          the Bank and issued 277,725 shares of the Company's common stock, with
          $.01 par value,  at $10.00 per share.  Net  proceeds of the  Company's
          stock  issuance,   after  costs  of   approximately   $308,000,   were
          approximately  $2,469,000.  Additional costs of  approximately  $9,000
          were incurred during 2004.

                                                                            F-10
<PAGE>
                          COMMUNITY FIRST BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004


NOTE 3:  INVESTMENT SECURITIES

     The  amortized  cost and  approximate  fair  values  of  securities  are as
     follows:
<TABLE>
<CAPTION>
                                                                   GROSS             GROSS
                                              AMORTIZED          UNREALIZED        UNREALIZED        APPROXIMATE
                                                 COST              GAINS             LOSSES          FAIR VALUE
                                            -------------------------------------------------------------------------
<S>                                           <C>               <C>               <C>               <C>
           AVAILABLE-FOR-SALE SECURITIES
               December 31, 2005
                  U. S. Government
                     agencies                 $     1,751,931   $           0     $        48,784   $   1,703,147
                                               ==============    ============      ==============    ============

               December 31, 2004
                  U. S. Government
                     agencies                 $     2,257,993   $           0     $        42,708   $   2,215,285
                                               ==============    ============      ==============    ============

           HELD-TO-MATURITY SECURITIES
               December 31, 2005
                  Mortgage-backed
                     securities               $      65,522     $       3,901     $           166   $      69,257
                                               ============      ============      ==============    ============

               December 31, 2004
                  Mortgage-backed
                     securities               $      88,965     $       6,060     $             0   $      95,025
                                               ============      ============      ==============    ============
</TABLE>

     The  amortized   cost  and  fair  value  of  debt   securities,   including
     mortgage-backed  securities at December 31, 2005, by  contractual  maturity
     are  shown  below.   Expected   maturities  will  differ  from  contractual
     maturities  because  borrowers  may  have  the  right  to  call  or  prepay
     obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
                                                         AVAILABLE-FOR-SALE                 HELD-TO-MATURITY
                                                 ---------------------------------------------------------------------
                                                      AMORTIZED           FAIR          AMORTIZED          FAIR
                                                        COST             VALUE            COST            VALUE
                                                 ---------------------------------------------------------------------
<S>                                                <C>                <C>              <C>              <C>
                   Within one year                 $   1,000,000      $    981,720                --              --
                   One to five years                     751,931           721,427                --              --
                   Five to 10 years                           --                --                --              --
                   Mortgage-backed securities                 --                --     $      65,522    $     69,257
                                                    ------------        ----------       -----------      ----------

                                                   $   1,751,931      $  1,703,147     $      65,522    $     69,257
                                                    ============       ===========      ============     ===========
</TABLE>

     Investment  securities with a carrying value of approximately  $191,000 and
     $2,035,000  at December  31, 2005 and 2004,  respectively,  were pledged as
     collateral for certain customer deposits.

                                                                            F-11
<PAGE>

                          COMMUNITY FIRST BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004

     Certain  investments  in debt  securities  are  reported  in the  financial
     statements at an amount less than their  historical  cost. Total fair value
     of these  investments  at December 31, 2005 and 2004,  was  $1,703,147  and
     $2,215,285,   which   is   approximately   96%  and   95%  of  the   Bank's
     available-for-sale   and  held-to-maturity   investment  portfolio.   These
     declines  primarily resulted from recent increases in market interest rates
     and failure of certain  investments to maintain  consistent  credit quality
     ratings.

     Based on  evaluation of available  evidence,  including  recent  changes in
     market interest rates,  credit rating information and information  obtained
     from regulatory filings, management believes the declines in fair value for
     these securities are temporary.

     Should  the  impairment  of any  of  these  securities  become  other  than
     temporary,  the  cost  basis  of the  investment  will be  reduced  and the
     resulting   loss   recognized   in   net   income   in   the   period   the
     other-than-temporary impairment is identified.

     The following table shows our investments' gross unrealized losses and fair
     value, aggregated by investment category and length of time that individual
     securities  have been in a continuous  unrealized loss position at December
     31, 2005 and 2004:
<TABLE>
<CAPTION>
                                      LESS THAN 12 MONTHS          12 MONTHS OR MORE                 TOTAL
                                  ------------------------------------------------------------------------------------
           DESCRIPTION OF             FAIR       UNREALIZED       FAIR       UNREALIZED       FAIR       UNREALIZED
             SECURITIES               VALUE        LOSSES         VALUE        LOSSES         VALUE        LOSSES
        --------------------------------------------------------------------------------------------------------------
<S>                                 <C>          <C>            <C>           <C>         <C>            <C>
         DECEMBER 31, 2005
         Mortgage-backed
           securities               $  19,664    $      166     $       --    $      --   $     19,664   $      166
         U. S. Government agencies         --            --      1,703,147       48,784      1,703,147       48,784
                                     --------      --------      ---------    ---------      ---------    ---------

             Total temporarily
                impaired
                securities          $  19,664    $      166     $1,703,147   $   48,784     $1,722,811   $   48,950
                                     ========     =========      =========    =========      =========    =========
<CAPTION>

                                      LESS THAN 12 MONTHS          12 MONTHS OR MORE                 TOTAL
                                  ------------------------------------------------------------------------------------
           DESCRIPTION OF             FAIR       UNREALIZED       FAIR       UNREALIZED       FAIR       UNREALIZED
             SECURITIES               VALUE        LOSSES         VALUE        LOSSES         VALUE        LOSSES
        --------------------------------------------------------------------------------------------------------------
<S>                                <C>           <C>            <C>          <C>            <C>          <C>
         DECEMBER 31, 2004
         U. S. Government
           agencies                $2,215,285    $   42,708     $       --   $       --     $2,215,285   $   42,708
                                    ---------     ---------      ---------    ---------      ---------    ---------

             Total temporarily
                impaired
                securities         $2,215,285    $   42,708     $        0   $        0     $2,215,285   $   42,708
                                    =========     =========      =========    =========      =========    =========
</TABLE>

                                                                            F-12
<PAGE>

                          COMMUNITY FIRST BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004

NOTE 4:  LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES

        Loans at December 31 are summarized as follows:
<TABLE>
<CAPTION>
                                                                                   2005                2004
                                                                               ----------------------------------
<S>                                                                           <C>                <C>
           Real estate mortgage loans
               One-to-four family residential - first                         $     47,739,224   $     39,757,639
               One-to-four family residential - second                               1,755,309          1,208,539
               Multi-family                                                            791,323          1,075,088
               Commercial                                                            7,355,604          2,952,877
               Construction                                                          2,304,825          1,899,906
           Other loans
               Consumer installment                                                    194,396            252,549
               Commercial                                                              819,447          2,369,656
               Automobile                                                            2,897,924          1,904,563
               Passbook                                                                397,879            330,085
               Overdrafts                                                               51,792             12,104
               Other                                                                   658,387            488,486
                                                                               ---------------    ---------------
                                                                                    64,966,110         52,251,492
           Less
               Allowance for loan losses                                               387,822            319,937
                                                                               ---------------    ---------------

                  Net loans                                                   $     64,578,288   $     51,931,555
                                                                               ===============    ===============
</TABLE>

        Activity in the allowance for loan losses was as follows:
<TABLE>
<CAPTION>

                                                                                   2005                2004
                                                                            ----------------------------------------
<S>                                                                           <C>                <C>
           Balance, beginning of year                                         $        319,937   $        180,955
               Provision charged to expense                                             78,500            163,500
               Losses charged off                                                      (16,192)           (25,434)
               Recoveries                                                                5,577                916
                                                                               ---------------    ---------------

           Balance, end of year                                               $        387,822   $        319,937
                                                                               ===============    ===============
</TABLE>

     At December 31, 2005 and 2004,  the total  recorded  investment in loans on
     nonaccrual amounted to approximately  $262,716 and $130,968,  respectively,
     and the total  recorded  investment  in loans  past due 90 days or more and
     still accruing  interest  amounted to  approximately  $43,900 and $165,700,
     respectively.  At December  31, 2005 and 2004,  there were no loans,  which
     were specifically classed as impaired loans.

                                                                            F-13
<PAGE>

                          COMMUNITY FIRST BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004


     In the ordinary course of business, the Bank has and expects to continue to
     have transactions,  including borrowings,  with its officers and directors.
     In the opinion of management,  such  transactions were on substantially the
     same terms, including interest rates and collateral, as those prevailing at
     the time of comparable  transactions with other persons and did not involve
     more than a normal risk of  collectibility or present any other unfavorable
     features  to the  Bank.  Loans  to such  borrowers,  at  December  31,  are
     summarized as follows:
<TABLE>
<CAPTION>
                                                                                   2005                2004
                                                                              ---------------------------------
<S>                                                                           <C>                <C>
           Balance, beginning of year                                         $        429,651   $      544,102
               Loan proceeds                                                           239,382          105,853
               Payments                                                                (44,224)        (220,304)
                                                                                --------------    -------------

           Balance, end of year                                               $        624,809   $      429,651
                                                                               ===============    =============

           Letters of Credit                                                  $          7,000   $            0
                                                                               ===============    =============
</TABLE>


NOTE 5:  PREMISES AND EQUIPMENT

     Major  classifications  of premises and  equipment  stated at cost,  are as
     follows:
<TABLE>
<CAPTION>

                                                                                   2005                2004
                                                                              -----------------------------------
<S>                                                                           <C>                <C>
           Land                                                               $        261,649   $        261,649
           Buildings and improvements                                                1,769,087          1,769,087
           Furniture, fixtures and equipment                                           968,488            971,307
                                                                               ---------------    ---------------
                                                                                     2,999,224          3,002,043
           Less accumulated depreciation                                               713,220            506,719
                                                                               ---------------    ---------------

           Net premises and equipment                                         $      2,286,004   $      2,495,324
                                                                               ===============    ===============
</TABLE>

     Depreciation  expense for the year ended December 31, 2005 and 2004 totaled
     $209,970 and $183,816, respectively.

                                                                            F-14
<PAGE>

                          COMMUNITY FIRST BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004

NOTE 6:  DEPOSITS

     Deposits at December 31 are summarized as follows:
<TABLE>
<CAPTION>
                                                     2005                               2004
                                         ----------------------------------------------------------------
                                            AMOUNT          PERCENTAGE         AMOUNT          PERCENTAGE
                                         ----------------------------------------------------------------
<S>                                      <C>                      <C>       <C>                       <C>
           Non-interest bearing
              demand                     $     6,143,507          11%       $     4,047,403           9%
           NOW accounts                        2,642,483           5              2,183,898           5
           Money market accounts               2,099,769           4              3,467,230           7
           Passbook savings                    3,789,177           7              4,091,194           9
           Time deposits                      39,801,737          73             32,676,311          70
                                          --------------   ---------         --------------   ---------

                                         $    54,476,673         100%       $    46,466,036         100%
                                          ==============   =========         ==============   =========
</TABLE>

     Time deposit  accounts in denominations of $100,000 or more were $9,048,175
     and $9,646,446, at December 31, 2005 and 2004, respectively.

     At December  31, 2005,  the  scheduled  maturities  of time deposit were as
     follows:

           2006                                       $     24,239,440
           2007                                             10,085,443
           2008                                              3,900,097
           2009                                                289,130
           2010                                              1,287,627
                                                       ---------------

                                                      $     39,801,737
                                                       ===============

     Interest  expense  on  deposits  for  the  years  ended  December  31,  are
     summarized as follows:
<TABLE>
<CAPTION>
                                                                                   2005                2004
                                                                              -----------------------------------
<S>                                                                           <C>                <C>
           Certificates of deposit                                            $      1,305,311   $        922,649
           Money market accounts                                                        13,626             11,343
           NOW accounts                                                                  6,932              5,517
           Passbook savings                                                             15,001             10,903
                                                                               ---------------    ---------------
                                                                                     1,340,870            950,412
           Less interest retained for early withdrawal                                      --                 70
                                                                               ---------------    ---------------

                                                                              $      1,340,870   $        950,342
                                                                               ===============    ===============
</TABLE>

     In the  ordinary  course  of  business,  the  Bank  has  continued  to have
     transactions,  including deposits,  with its officers and directors. In the
     opinion of management,  such  transactions  were on substantially  the same
     terms,  including  interest  rates  prevailing  at the time,  of comparable
     transactions  with other  persons.  Deposits  from  officers and  directors
     totaled $363,622 and $490,335, on December 31, 2005 and 2004, respectively.

                                                                            F-15
<PAGE>

                          COMMUNITY FIRST BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004

          The aggregate  amount of overdrawn  deposit  accounts  reclassified as
          loans as of December  31, 2005 and 2004  totaled  $35,100 and $31,858,
          respectively.


NOTE 7:  FEDERAL HOME LOAN BANK ADVANCES AND OTHER SHORT-TERM BORROWINGS

          Short-term debt consisted of short-term  fixed rate advances from FHLB
          totaling  $13,000,000  at December 31, 2005 and 2004.  The advances at
          December 31, 2005 and 2004, have a 4.33% and a 2.42% variable interest
          rate  respectively.  Advances  from FHLB are  collateralized  with the
          Bank's mortgage  portfolio to 135% of the balance of the note (blanket
          mortgage  collateral)  in the  amount of  $17,550,000  and is  further
          collateralized  by the Bank's stock in the FHLB.  At December 31, 2005
          the Bank had an  additional  borrowing  capacity with the Federal Home
          Loan Bank of approximately $18 million.


     LINE OF CREDIT

          The Company has a $1,250,000  revolving line of credit,  which expires
          on March 31, 2006. At December 31, 2005, $850,000 was advanced against
          this line.  The line of credit is restricted by various  financial and
          non-financial  covenants,  one of which  limits  the  Company's  total
          non-FHLB borrowing capacity to $1,250,000. The Company's current draws
          of $850,000  coupled  with its notes  payable to directors of $400,000
          equals its total  borrowing  capacity under such covenant and prevents
          further  draws on this line  without  written  consent by the Banker's
          Bank. The line is  collateralized by all of the Company's stock in the
          Bank.  Interest  varies  monthly  and is based on the prime  rate plus
          .25%,  which was 7.50% on  December  31,  2005.  Interest  is  payable
          monthly and principal is due at maturity.


     RELATED PARTY NOTES PAYABLE

          The Company has four unsecured  notes payable to directors of the Bank
          totaling  $400,000.  These loans are set to mature on March 31,  2006.
          The notes bear a fixed rate of interest of 7.50%.  Interest is payable
          monthly and principal is due at maturity.

          As of December  31,  2005,  the Company  maintained  cash  reserves of
          $45,603 for payment of interest on its Bankers Bank line of credit and
          its notes payable to directors.



NOTE 8:  EMPLOYEE BENEFITS


     DEFINED BENEFIT PLAN

          The Bank is a  participant  in a pension  fund  known as the  Pentegra
          Group.  This  plan  is  a  multi-employer   plan;  separate  actuarial
          valuations are not made with respect to each  participating  employer.
          The plan required contributions in the amount of approximately $64,800
          and  $59,700  for  the  years  ended   December  31,  2005  and  2004,
          respectively. The plan provides pension benefits for substantially all
          of the Bank's employees.

                                                                            F-16
<PAGE>
                          COMMUNITY FIRST BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004

     DEFINED CONTRIBUTION PLAN

          The Bank began a retirement savings 401(k) plan covering substantially
          all employees on January 1, 2004.  Employees may  contribute up to 20%
          of their  compensation with the Bank matching a certain  percentage of
          the  employee's  compensation  using a formula to be  determined  each
          year.  The Bank made no matching  contribution  to the plan in 2005 or
          2004.


     RESTRICTED STOCK PLAN

          The Company has a  Restricted  Stock Plan,  covering  8,331  shares of
          common  stock,  the  purpose  of  which  is to  reward  and to  retain
          personnel of experience and ability in key positions of responsibility
          with the Bank and any  subsidiaries  with an increased equity interest
          in the Company as compensation for their prior and anticipated  future
          professional  contributions and service. Shares awarded under the plan
          entitle the shareholder to all rights of common stock ownership except
          that the shares may not be sold, transferred,  pledged,  exchanged, or
          otherwise disposed of until the shares are earned and non-forfeitable.
          The shares awarded under the Restricted Stock Plan shall be earned and
          non-forfeitable at the rate of one-fifth per year over five years from
          the grant date.  During May 2005 the Company granted 5,197 shares with
          a  restriction  period  of five  years  at a market  price of  $11.50.
          Deferred compensation expense recorded for the year ended December 31,
          2005  relating to these shares of restricted  stock was  approximately
          $7,500.


     STOCK OPTION PLAN

          On May  20,  2004,  the  stockholders  of  the  Company  approved  the
          establishment  of the Community First Bancorp,  Inc. 2004 Stock Option
          Plan. Under the Option Plan, the Company may grant either incentive or
          nonincentive  stock  options to  directors  and key  employees  for an
          aggregate of 27,772  shares of the  Company's  common  stock,  with an
          exercise price equal to the fair market value of the stock at the date
          of the award.  Upon  exercise  of the  options,  the Company may issue
          stock  out of  authorized  shares  or  purchase  the stock in the open
          market.  The option to purchase shares expires 10 years after the date
          of the grant. The options vest, and thereby become exercisable, at the
          rate of 20% on the one-year  anniversary  of the date of the grant and
          20% annually thereafter.  The options become vested immediately in the
          case of death or  disability  or upon a change in the  control  of the
          Company.

          On December 8, 2005 the optionees  agreed to the  cancellation  of all
          the outstanding stock options, which totaled 16,442 as of that date.

                                                                            F-17
<PAGE>
                          COMMUNITY FIRST BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004

<TABLE>
<CAPTION>
                                                                     2005
                                                        ----------------------------
                                                                         WEIGHTED-
                                                                         AVERAGE
                                                          SHARES      EXERCISE PRICE
                                                        ----------------------------
<S>                                                      <C>             <C>
           Outstanding, beginning of year                16,442          $16.00
               Granted                                       --              --
               Exercised                                     --              --
               Forfeited                                     --              --
               Cancelled                                (16,442)          16.00
               Expired
                                                       --------          ------

           Outstanding, end of year                           0          $ 0.00
                                                       ========           =====

           Options exercisable, end of year                   0
                                                       ========
<CAPTION>
                                                                     2004
                                                        ----------------------------
                                                                         WEIGHTED-
                                                                         AVERAGE
                                                          SHARES      EXERCISE PRICE
                                                        ----------------------------
<S>                                                      <C>             <C>

           Outstanding, beginning of year                    --              --
               Granted                                   16,442          $16.00
               Exercised                                     --              --
               Forfeited                                     --              --
               Expired                                       --              --
                                                        -------          ------

           Outstanding, end of year                      16,442          $16.00
                                                       ========           =====

           Options exercisable, end of year                   0
                                                       ========
</TABLE>

          The fair value of each option  grant is  estimated  on the date of the
          grant using the Black-Scholes  option-pricing model.  Weighted-average
          assumptions, for the periods indicated, are presented in the following
          table.

                                                                   2004
                                                                ------------

Dividend yields                                                       0.00%
Volatility factors of expected market price of common stock          37.07%
Risk-free interest rates                                              2.18%
Expected life of options                                            5 years

Weighted-average fair value of options granted during the year     $  5.97

                                                                            F-18

<PAGE>
                          COMMUNITY FIRST BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004


     The following table  summarizes  information  about stock options under the
     plan outstanding at December 31, 2005 and 2004:
<TABLE>
<CAPTION>
                                                            OPTIONS OUTSTANDING                    OPTIONS EXERCISABLE
                                                --------------------------------------------------------------------------
                                                    WEIGHTED-AVERAGE      WEIGHTED-                          WEIGHTED-
                        EXERCISE      NUMBER           REMAINING       AVERAGE EXERCISE         NUMBER    AVERAGE EXERCISE
                         PRICE     OUTSTANDING      CONTRACTUAL LIFE        PRICE            EXERCISABLE      PRICE
--------------------------------------------------------------------------------------------------------------------------

<S>                     <C>         <C>               <C>                 <C>                  <C>           <C>
  December 31, 2005     $ 0.00           0               0 years          $ 0.00                0             $0.00

  December 31, 2004     $16.00      16,442             4.5 years          $16.00                0             $0.00
</TABLE>


NOTE 9:  INCOME TAXES

     The provision (credit) for income taxes includes these components:
<TABLE>
<CAPTION>

                                                       2005          2004
                                                   -------------------------

<S>                                                <C>             <C>
Taxes currently payable                            $     --        $     --
Deferred income taxes                                    --         115,580
                                                   --------        --------

       Income tax expense (credit)                 $     --        $115,580
                                                   ========        ========
</TABLE>

     A reconciliation of income tax  expense/(benefit)  at the statutory rate to
     the Bank's actual income tax expense is shown below:
<TABLE>
<CAPTION>
                                                               2005          2004
                                                           -------------------------

<S>                                                         <C>             <C>
Computed at the statutory rate (34%)                        $(149,425)   $(311,436)
Increase (decrease) resulting from
    Changes in the deferred tax asset valuation allowance     148,013      418,547
    Other                                                       1,412        8,469
                                                            ---------    ---------

       Actual tax expense (credit)                          $       0    $ 115,580
                                                            =========    =========
</TABLE>
                                                                            F-19
<PAGE>
                          COMMUNITY FIRST BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004

     The tax effects of temporary differences related to deferred taxes shown on
     the balance sheets were:

                                                           2005       2004
                                                       ----------------------

Deferred tax assets
    Allowance for loan losses                          $ 131,859    $ 108,779
    Net operating loss carryovers                        683,842      523,408
    Unrealized loss on available-for-sale securities      16,587       14,521
    Capital loss carryover                                 5,100        5,100
    Charitable contributions carryover                     9,950       11,292
    Deferred compensation                                  2,540           --
    Other                                                    850           --
                                                       ---------    ---------

                                                         850,728      663,100
                                                       ---------    ---------

Deferred tax liabilities
    Depreciation                                          85,313       59,892
    FHLB stock                                           181,968      170,102
    Other                                                     --           38
                                                       ---------    ---------

                                                         267,281      230,032
                                                       ---------    ---------

       Net deferred tax asset before
          valuation allowance                            583,447      433,068
                                                       ---------    ---------

Valuation allowance
    Beginning balance                                   (418,847)          --
    Increase during the period                          (148,013)    (418,547)
                                                       ---------    ---------

    Ending balance                                      (566,860)    (418,547)
                                                       ---------    ---------

       Net deferred tax asset                          $  16,587    $  14,521
                                                       =========    =========


        As of December 31, 2005, the Company had approximately $2,011,000 of net
        operating loss carryovers available to offset future federal income. The
        net operating losses will begin to expire in the year 2010.

        Retained earnings at December 31, 2005 and 2004,  include  approximately
        $647,729,  for which no deferred  federal  income tax liability has been
        recognized.  This amount  represents an allocation of income to bad debt
        deductions  for tax purposes  only.  Reduction of amounts  allocated for
        purposes  other than tax bad debt  losses or  adjustments  arising  from
        carryback of net operating losses,  would create income for tax purposes
        only,  which would be subject to the  then-current  corporate income tax
        rate.  The deferred  income tax liability on the  preceding  amount that
        would have been  recorded  if it was  expected to reverse  into  taxable
        income in the foreseeable future was approximately  $220,228 at December
        31, 2005 and 2004.

                                                                            F-20
<PAGE>

                          COMMUNITY FIRST BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004

NOTE 10: OTHER COMPREHENSIVE LOSS

     Other comprehensive loss components and related taxes were as follows:
<TABLE>
<CAPTION>
                                                               2005       2004
                                                             -------------------

        <S>                                                  <C>        <C>
        Unrealized losses on available-for-sale securities   $(6,076)   $(7,128)
                                                             -------    -------
               Other comprehensive loss, before
                  tax effect                                  (6,076)    (7,128)
        Tax benefit                                           (2,066)    (2,424)
                                                             -------    -------

               Other comprehensive loss                      $(4,010)   $(4,704)
                                                             =======    =======
</TABLE>


NOTE 11: REGULATORY MATTERS

     The Bank is subject to various regulatory capital requirements administered
     by  certain  federal  banking  agencies.  Failure to meet  minimum  capital
     requirements  can  initiate  certain  mandatory  and  possibly   additional
     discretionary  actions by  regulators  that,  if  undertaken,  could have a
     direct material effect on the Bank's  financial  statements.  Under capital
     adequacy  guidelines  and the  regulatory  framework for prompt  corrective
     action,  the Bank  must  meet  specific  capital  guidelines  that  involve
     quantitative  measures  of  the  Bank's  assets,  liabilities  and  certain
     off-balance-sheet   items  as  calculated   under   regulatory   accounting
     practices.  The Bank's capital amounts and  classification are also subject
     to  qualitative   judgments  by  the  regulators  about  components,   risk
     weightings and other factors.

     Quantitative  measures established by regulation to ensure capital adequacy
     require the Bank to maintain  minimum  amounts and ratios (set forth in the
     table below).  Management believes,  as of December 31, 2005 and 2004, that
     the Bank meets all capital adequacy requirements to which it is subject.

     As of  December  31,  2005,  the  most  recent  notification  from  the OTS
     categorized the Bank as well capitalized under the regulatory framework for
     prompt corrective  action. To be categorized as well capitalized,  the Bank
     must  maintain  minimum  total  risk-based,  Tier I  risk-based  and Tier I
     leverage  ratios as set forth in the  table.  There  are no  conditions  or
     events since that  notification  that management  believes have changed the
     Bank's category.

                                                                            F-21
<PAGE>
                          COMMUNITY FIRST BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004

     The Bank's  actual  capital  amounts and ratios are also  presented  in the
<TABLE>
<CAPTION>
                                                                                          TO BE WELL CAPITALIZED
                                                                                          UNDER PROMPT CORRECTIVE
                                                               FOR CAPITAL ADEQUACY          ACTION PROVISIONS
                                         ACTUAL                 PURPOSES REQUIRED                REQUIRED
                              ---------------------------------------------------------------------------------------
                                 AMOUNT       PERCENTAGE      AMOUNT      PERCENTAGE      AMOUNT       PERCENTAGE
                              ---------------------------------------------------------------------------------------
<S>                             <C>              <C>       <C>                         <C>
     DECEMBER 31, 2005
           Total risk-based
              capital           $   4,311        10.22%    $     3,373         8.0%    $     4,217         10.0%
           Tier I
              risk-based
              capital           $   3,923         9.30%    $     1,687         4.0%    $     2,530          6.0%
           Tier I core
              capital           $   3,923         5.47%    $     2,871         4.0%    $     3,589          5.0%
           Tangible equity
              capital           $   3,923         5.47%    $     1,077         1.5%    $     1,077          1.5%

     DECEMBER 31, 2004
           Total risk-based
              capital           $   4,161        11.78%    $     2,826         8.0%    $     3,533         10.0%
           Tier I
              risk-based
              capital           $   3,842        10.88%    $     1,413         4.0%    $     2,120          6.0%
           Tier I core
              capital           $   3,842         6.05%    $     2,542         4.0%    $     3,177          5.0%
           Tangible equity
              capital           $   3,842         6.05%    $       953         1.5%    $       953          1.5%
</TABLE>

     LIQUIDATION  ACCOUNT.  Upon  conversion  to a capital  stock  savings bank,
     eligible  account holders who continued to maintain their deposit  accounts
     in the Bank were granted priority in the event of the future liquidation of
     the Bank through the establishment of a special "Liquidation Account" in an
     amount  equal  to the  consolidated  net  worth  of the Bank as of the date
     specified  in the  Plan of  Conversion.  The  initial  liquidation  account
     balance of $1,748,866 is reduced annually in proportion to decreases in the
     accounts of the eligible account holders.  The liquidation account does not
     restrict the use or  application  of net worth,  except with respect to the
     cash payment of dividends.  The Bank may not declare or pay a cash dividend
     on or  repurchase  any of its common  stock if the effect  would  cause its
     regulatory  capital  to be  reduced  below  the  amount  required  for  the
     liquidation account.

     DIVIDEND  RESTRICTIONS.  The payment of cash  dividends  by the Bank on its
     common stock is limited by regulations of the Office of Thrift  Supervision
     (OTS).  Interest on deposits will be paid prior to payments of dividends on
     common  stock.  Additional  limitation  on  dividends  declared  or paid or
     repurchases  of the Bank stock are tied to the Bank's  level of  compliance
     with its regulatory capital requirements. Under current OTS regulations the
     Bank  must  either  1)  file  notification  with  the OTS  because  it is a
     subsidiary  of  a  savings  and  loan  holding  company  or  2)  apply  for
     distributions  if  the  total  amount  of  capital  distributions  for  the
     applicable  calendar  year  exceeds  net  income for that year to date plus
     retained net income for the preceding two years.

                                                                            F-22
<PAGE>
                          COMMUNITY FIRST BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004

     FEDERAL RESERVE ACT. In September 2005 the Company  inadvertently  violated
     Section 23A of the Federal  Reserve Act. The  violation  occurred  when the
     Company  pledged  assets of the Bank as collateral  for the Company's  note
     payable  to a third  party  lender.  Prior to filing  the  Company's  third
     quarter Form 10Q with the Securities and Exchange  Commission,  the Company
     discovered and corrected the violation.

     PRIVATE PLACEMENT OFFERING.  On  March 8, 2006,  the  Company  commenced  a
     Private Placement Offering for up to $6,000,000 in common stock to selected
     accredited investors and a limited number of non-accredited investors under
     SEC Rule 506 (the  "Offering").  The Company is not using an underwriter or
     placement agent. The Offering is intended to assist the Bank in maintaining
     regulatory capital compliance.


NOTE 12: DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS

     The  following  table  presents  estimated  fair  values  of the  Company's
     financial instruments. The fair values of certain of these instruments were
     calculated by discounting  expected cash flows, which involves  significant
     judgments by  management  and  uncertainties.  Fair value is the  estimated
     amount at which  financial  assets or  liabilities  could be exchanged in a
     current  transaction  between  willing  parties,  other than in a forced or
     liquidation  sale.  Because no market exists for certain of these financial
     instruments and because  management does not intend to sell these financial
     instruments,  the Company does not know whether the fair values shown below
     represent  values at which the respective  financial  instruments  could be
     sold individually or in the aggregate.


                                                                            F-23
<PAGE>
                          COMMUNITY FIRST BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004

<TABLE>
<CAPTION>
                                                         2005                                   2004
                                        ------------------------------------------------------------------------------
                                             CARRYING              FAIR             CARRYING             FAIR
                                               VALUE              VALUE               VALUE              VALUE
                                        ------------------------------------------------------------------------------
<S>                                       <C>                <C>                 <C>                <C>
     Financial assets
        Cash and cash equivalents         $      2,008,948   $      2,008,948    $      5,793,196   $      5,793,196
        Held-to-maturity securities       $         65,522   $         69,257    $         88,965   $         95,025
        Available-for-sale securities     $      1,703,147   $      1,703,147    $      2,215,285   $      2,215,285
        FHLB stock                        $        721,900   $        721,900    $        687,000   $        687,000
        Loans, net of allowance for
           loan losses                    $     64,578,288   $     59,984,000    $     51,931,555   $     51,932,700
        Interest receivable               $        288,501   $        288,501    $        227,066   $        227,066

     Financial liabilities
        Deposits                          $     54,476,673   $     54,503,179    $     46,466,036   $     46,615,800
        FHLB advances                     $     13,000,000   $     12,979,000    $     13,000,000   $     13,000,000
        Advances under line of credit
           and notes payable              $      1,250,000   $      1,250,000    $        750,000   $        750,000
        Interest payable                  $        158,391   $        158,391    $         56,213   $         56,213

     Unrecognized financial
        instruments (net of contract
        amount)
     Commitments to originate
        loans                             $              0   $              0    $              0   $              0
</TABLE>

          The following  methods and assumptions  were used to estimate the fair
          value of each class of financial instruments.


     CASH AND CASH EQUIVALENTS,  INTEREST-BEARING  DEPOSIT AND FEDERAL HOME LOAN
     BANK STOCK

          The carrying amount approximates fair value.

     SECURITIES

          Fair values equal quoted market prices, if available. If quoted market
          prices  are not  available,  fair value is  estimated  based on quoted
          market prices of similar securities.


     LOANS

          The fair value of loans is  estimated by  discounting  the future cash
          flows using the current  rates at which similar loans would be made to
          borrowers  with  similar  credit  ratings  and for the same  remaining
          maturities.  Loans with similar  characteristics  were  aggregated for
          purposes of the calculations.  The carrying amount of accrued interest
          approximates its fair value.

                                                                            F-24
<PAGE>
                          COMMUNITY FIRST BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004


     DEPOSITS

          Deposits include demand deposits,  savings accounts,  NOW accounts and
          certain money market deposits.  The carrying amount  approximates fair
          value.  The fair value of  fixed-maturity  time  deposits is estimated
          using a  discounted  cash  flow  calculation  that  applies  the rates
          currently offered for deposits of similar remaining maturities.


     SHORT-TERM BORROWINGS AND INTEREST PAYABLE

          The carrying amount approximates fair value.


     COMMITMENTS TO ORIGINATE LOANS

          The fair value of  commitments to originate  loans is estimated  using
          the fees currently  charged to enter into similar  agreements,  taking
          into account the  remaining  terms of the  agreements  and the present
          creditworthiness   of  the   counterparties.   For   fixed-rate   loan
          commitments,  fair value also considers the difference between current
          levels of interest rates and the committed rates.


NOTE 13: SIGNIFICANT ESTIMATES AND CONCENTRATIONS

          Accounting  principles  generally  accepted  in the  United  States of
          America  require  disclosure  of  certain  significant  estimates  and
          current  vulnerabilities  due  to  certain  concentrations.  Estimates
          related to the  allowance  for loan losses are  reflected  in the note
          regarding loans. Current vulnerabilities due to certain concentrations
          of credit risk are  discussed  in the note on  commitments  and credit
          risk.


NOTE 14: COMMITMENTS AND CREDIT RISK

          The Bank grants  agribusiness,  commercial  and  residential  loans to
          customers primarily in Hopkins County, Kentucky.


     COMMITMENTS TO ORIGINATE LOANS

          Commitments to originate loans are agreements to lend to a customer as
          long as there is no  violation  of any  condition  established  in the
          contract.  Commitments  generally have fixed expiration dates or other
          termination  clauses and may require payment of a fee. Since a portion
          of the  commitments  may expire  without  being drawn upon,  the total
          commitment   amounts  do  not   necessarily   represent   future  cash
          requirements.  Each  customer's  creditworthiness  is  evaluated  on a
          case-by-case  basis.  The  amount of  collateral  obtained,  if deemed
          necessary,   is  based  on  management's   credit  evaluation  of  the
          counterparty.   Collateral  held  varies  but  may  include   accounts
          receivable,  inventory, property, plant and equipment, commercial real
          estate and residential real estate.

                                                                            F-25
<PAGE>
                          COMMUNITY FIRST BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004


          At December  31, 2005 and 2004,  the Bank had granted  commitments  to
          extend  credit and  unused  lines of credit to  borrowers  aggregating
          approximately $1,888,700 and $1,948,000, respectively. The commitments
          to extend credit expire over varying periods of time with the majority
          expiring within a one-year period.

     STANDBY LETTERS OF CREDIT

          Standby  letters of credit  are  irrevocable  conditional  commitments
          issued by the Bank to  guarantee  the  performance  of a customer to a
          third party.  Financial standby letters of credit are primarily issued
          to  support  public  and  private  borrowing  arrangements,  including
          commercial paper, bond financing and similar transactions. Performance
          standby  letters  of credit  are issued to  guarantee  performance  of
          certain  customers under  nonfinancial  contractual  obligations.  The
          credit  risk  involved  in  issuing   standby  letters  of  credit  is
          essentially the same as that involved in extending loans to customers.
          Should the Banks be obligated to perform under the standby  letters of
          credit,  they may seek recourse from the customer for reimbursement of
          amounts paid.

          The Banks had outstanding standby letters of credit totaling $7,000 at
          December  31,  2005.  There were no  outstanding  letters of credit at
          December 31, 2004.


     OTHER CREDIT RISKS

          At December 31, 2005 and 2004,  approximately $101,000 and $4,076,000,
          respectively,  were held in  deposits  at  financial  institutions  in
          excess of federally insured amounts.



NOTE 15: FUTURE CHANGE IN ACCOUNTING PRINCIPLE

          On December 16, 2004, the Financial  Accounting Standards Board (FASB)
          issued FASB  STATEMENT NO. 123 (revised  2004),  Share-Based  Payment,
          which  is a  revision  of  FASB  Statement  NO.  123,  Accounting  for
          Stock-Based Compensation.  STATEMENT 123(R) supersedes APB Opinion NO.
          25,  Accounting  for  Stock  Issued  to  Employees,  and  amends  FASB
          STATEMENT NO. 95,  Statement of Cash Flows. The approach to accounting
          for  share-based  payments  in  STATEMENT  123(R)  is  similar  to the
          approach  described  in  STATEMENT  123.  However,   STATEMENT  123(R)
          requires all share-based  payments to employees,  including  grants of
          employee stock options,  to be recognized in the financial  statements
          based on their fair values and no longer  allows pro forma  disclosure
          as an alternative to financial statement recognition. The Company will
          be required to adopt STATEMENT  123(R) at the beginning of its quarter
          ending March 31, 2006. The Company has not  determined  what financial
          statement impact STATEMENT 123(R) will have on the Company.


                                                                            F-26

<PAGE>

                                   SIGNATURES

     In accordance  with Section 13 or 15(d) of the Exchange Act, the registrant
has duly  caused  this  report to be signed  on its  behalf by the  undersigned,
thereunto duly authorized.

                                       COMMUNITY FIRST BANCORP, INC.

Date:   March 31, 2006                 By: /s/ William M. Tandy
                                           -------------------------------------
                                           William M. Tandy
                                           President and Chief Executive Officer
                                           (Duly Authorized Officer)

     In  accordance  with the Exchange Act, this report has been signed below by
the following  persons on behalf of the  registrant and in the capacities and on
the dates indicated.

By: /s/  William M. Tandy                                  Date: March 31, 2006
    -------------------------------------------------
    William M. Tandy
    President, Chief Executive Officer and Director
    (Principal Executive Officer)

By: /s/  Michael D. Wortham                                Date: March 31, 2006
    -------------------------------------------------
    Michael D. Wortham
    Vice President and Director
    (Principal Financial and Accounting Officer)

By: /s/ Ralph T. Teague                                    Date: March 31, 2006
    -------------------------------------------------
      Ralph T. Teague
      Director

By:
    -------------------------------------------------
    Paul W. Arison
    Director

By: /s/ Charlotte E. Baldwin                               Date: March 31, 2006
    -------------------------------------------------
    Charlotte E. Baldwin
    Director

By:
    -------------------------------------------------
    Charles G. Ramsey
    Director

By: /s/ J. Craig Riddle                                    Date: March 31, 2006
    -------------------------------------------------
    J. Craig Riddle
    Director

By: /s/ Charles B. Vaughn                                  Date: March 31, 2006
    -------------------------------------------------
    Charles B. Vaughn
    Director

By:
    -------------------------------------------------
    Steven E. Carson
    Director